Toby Smith is pumpin' it also:
Clean energy turns spotlight on Cree E-mail Digg It!
Thursday, 14 June 2007
Changewave Investing gets its names from its focus on investing in "upstoppable" growth trends, and editor Toby Smith is known for finding these emerging trends well before Wall Street joins the bandwagon.
Here, he looks at "the secular shift to solid-state lighting" and a "clean energy" play on Cree (NASDAQ: CREE), an LED solid-state lighting component manufacturer.
"The transformation from commodity LEDs for cell phones to broader market opportunities has gone slower than expected for the company, but with a key new acquisition and mandates around the world for the elimination of incandescent bulbs, I believe the time is right to buy shares.
"Once consumers see the difference in durability (50,000 hours versus 1,000) and the quality of light for LEDs vs. compact fluorescent bulbs (night and day, almost literally), and see that they use 90% less electricity at the same time, Edisonâs light bulbs will go the way of the dodo bird. The investment world is rapidly coming to this conclusion as well.
"The world can no longer afford incandescent lighting, and that puts Cree in the catbird seat. The firm has the best white-light LED technology, the necessary manufacturing expertise, and now they have a subsidiary in -- you guessed it -- China, which is really supercharging their white-light LED sales.
"The wave of light-bulb banning is huge -- worldwide -- and growing. California and Canada are banning the use of incandescent bulbs by 2012, while Australia has announced plans to ban incandescent bulbs by 2010.
"The European Union votes on a region-wide ban by 2012 in the next few months. And in New Jersey, where the first practical incandescent bulb emerged from Thomas Edison's laboratory in 1879, a bill has been introduced to ban its use in government buildings.
"Why? Energy conservation and strategies to overcome global warming are becoming increasingly important political and social issues. The fact is, banning incandescent light bulbs is a relatively easy way to make a significant contribution to energy conservation -- and politicians get all the glory for relative zero negative press.
"Therefore, the death of the incandescent bulb in the United States and many other developed countries is only a few years away. In the United States, lighting accounts for 22% of all electric consumption.
"There is no denying that financial results at Cree have been disappointing for the last few years. But thatâs about to change. In Creeâs most recent quarter, the company basically broke even, although it officially posted earnings of 27 cents per share, with the majority of these profits due to a tax benefit.
"Over the past few years, investors have often expected faster growth and higher profits than Cree has been able to produce, and shares of Cree have dropped from about $35 to the $19 range.
"Cree noow has a very compelling valuation. Cree has a market cap of about $1.8 billion, $266 million in cash, and no significant long-term debt. As news about legislation banning incandescent bulbs continues, Cree now has the potential to live up to its appreciation. Now is the time for Cree -- and now is the time to invest on the solid-state lighting wave."
