It seems like there is a new solar name appearing out of thin air every week these days. Until a month ago, when Jim Cramer mentioned First Solar (FSLR), most individual investors had never heard of it. There are way too many solar stocks out there, some of which have long term potential, some speculative and some that should probably be avoided.

First off, I want to mention that I have recommended solar stocks in the past. Indeed, back in June of last year, I wrote a bullish piece on MEMC Electronics (WFR). But in light of the speculative air that surrounds this space now, I want to revisit solar stocks to see which ones are probably worth a second look, and which ones are fluff.

If you look at the company profile (on Yahoo Finance) of most of the solar companies out there, a common theme emerges. Apparently, they all "engage in the manufacture and sale of solar photovoltaic modules, and their solar modules provide electric power for residential, commercial, industrial, and other applications worldwide."

The table below shows most of the stocks that are hitting the wires these days. Note that I kept out Evergreen Solar (ESLR) and Energy Conversion Devices (ENER) because I dislike both these names. ESLR has been around for a while, and is still struggling to make money. I am tired of their continuous stream of disappointing quarters and I recommend selling if you own this one. As for ENER, management has let investors down time and again. They have reported back-to-back weaker than expected quarters and don't deserve a second look.

From the list above, the one sure shot solar energy play is MEMC Electronics (WFR). Based in the USA, they have quarter after quarter of strong earnings and growth. The stock trades very cheaply considering earnings are growing triple digit, but most of all, this company is the only major supplier of polysilicon, which is a required raw material for developing solar panels. With operating margins incredibly high and its monopolistic positioning in the solar space, I believe this is the best solar stock to own for the long run.

My second pick from this list is a speculative one. It is JA Solar (JASO). This Chinese company manufactures solar cells and sells them locally and in international markets of Europe. The stock has gone from $19 to $25 in two weeks, indicating institutional interest. While EPS growth and revenue growth is not available due to lack of historic information, analysts expect earnings to grow 140% this year and 40% next year. Based on these estimates, the stock trades cheaply. Additionally, it has the best return on equity in the entire group at a whopping 70% and operating margins second only to WFR.

For the same reasons that I like JA Solar, I also like Trina Solar (TSL) and Solarfun (SOLF). Both these are speculative bets and have enjoyed a solid run. In fact, TSL has moved 50% in 3 weeks and justifiably so. The Chinese maker of solar panels and systems has been growing earnings at over 500%, while keeping margins at reasonable levels. Similarly, SOLF, another Chinese competitor to TSL is growing earnings at over 200% with margins at 18%. These are all companies with positive earnings and significant revenue growth.

A relatively safer Chinese solar play is Suntech Power (STP). Here is a $5 billion mid-cap company growing triple digits, yet sporting a humble multiple. The stock has not participated in the recent run-up, but remains in a strong position. I prefer STP over SPWR, which does the same thing as STP, except it is a US company. Margins at SPWR are a lot lower and the stock is more expensive than its Chinese counterpart.

As for Canadian Solar (which is actually a Chinese company - go figure), they have yet to make money and unless they can improve their margins, it seems unlikely that they will make money anytime soon. Revenue growth is huge, but not enough for me to recommend the stock when there are so many other alternatives.

Finally, First Solar is perhaps the worst stock of the bunch. I understand the risk of going against Jim Cramer, but I am toroughly convinced that had it not been for Jim, the stock would never have moved. Just look at how expensive the stock is in relation to its size and earnings growth. FSLR has the lowest margins (except for CSIQ which really doesn't count), and its return on equity is a paltry 2%. Considering how much its competitors are making, this company is disappointing. The only fundamental advantage FSLR has over its rivals is that it does not depend on polysilicon, instead uses cadmium telluride semiconductor material to manufacture solar panels. So where others have to buy polysilicon from the likes of MEMC, FSLR uses a different, more cheaper material, which is not in such tight supply as polysilicon.

One thing that most investors already know and it goes without saying - this sector is volatile. Any fluctuation in demand or change in subsidization policies of governments in Europe will lead to a sell-off. However, on the flip-side, if other countries, specially Japan, US and Australia start offering subsidies on solar electricity, the stocks will shoot up.

Are there other plays in this sector that are worth considering?

-- Faisal Laljee
Full Disclosure: I own WFR and SOLF but my position can change anytime without notice.