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Solar-Panel-iStock_000009912571XSmall-300x198The solar industry offers some stellar investment opportunities, but not knowing the landscape could easily waste your hard-earned money on a company on the brink of burning out.

It is truly a tale of two markets.

On one hand, the average solar stock has risen 50% through September. China, Japan and the U.S. account for 52% of demand for solar products in 2013, filling the gap left by a once solar-hungry Europe.

As a result, Deutsche Bank forecasts solar industry backlogs will “grow exponentially over the next two years and as much as a seven-fold increase in solar installations, measured in capacity, through 2016.”

On the other hand, three U.S. companies went belly-up in one week during July—all former sweethearts of President Obama and huge recipients of Energy Department loans from days of stimulus past.

Solyndra, Abound Solar Manufacturing and Beacon Power were all victims of high costs, low prices and oversupplies.

Shift to China

Analysts suggested that failure on the part of these American companies elevated China as the world’s dominant solar industry manufacturer. It makes sense, especially when you consider that the Chinese government has made solar the poster child of green energy and is funding companies and handing out tax breaks left and right.

So investors shifted to Chinese companies, but the same low prices and dependency on government funding brought some of those down as well.

Suntech Power Holdings put its largest subsidiary, Wuxi Suntech Solar Energy Electric Power Co., into bankruptcy. Just last week LDK Solar Co. announced that it is struggling to pay back $2.7 billion in short-term loans and shares fell 5.7%. The same day, JA Solar Holdings Co. forecasted lower shipments to China in the current quarter and dropped 11%.

Like I said, investing in solar today is like walking through a minefield. Still, a few companies stand out with strong performance.   Here are three stocks that have the right stuff:

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