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OTC Journal Members:
Here's a new flash- yes, we are in
a Bear Market. This is a market environment characterized by a general
decline in stock valuations, lower volumes, and fears of deteriorating
economic conditions.
How long will it last? Typically,
these Bear Market corrections last somewhere in the 6 to 9 month
range. The worst one I have experienced in my 21 years was 2001 to 2002.5-
1.5 years. There were certainly money making ideas on the long side in
that time frame, but you had to be in the right companies- all ships did
not rise with the tide. When the market turned, there was gobs of money
to be made.
This Bear Market should be
relatively short lived. Despite all the doom and gloom news everyday about
the sub prime meltdown, I believe it has pretty much been priced into the
market, and financial institutions are aggressively writing down losses
and shoring up their balance sheets with equity financings. It might take
a bit longer for the housing market to absorb its excess supplies, but
the financiers are writing off losses very quickly.
The FED is pushing down interest
rates to the point where about one-half of US mortgages will be attractively
re finance able- clearly a good thing for consumers, and Congress is moving
forward on an economic stimulus package.
In my view, we have been in a Bear
Market since November. The market will start pricing in renewed growth
six months ahead of the event. We are probably through most of the Bear
Market already. The only question in my mind? Will there be a Spring Rally,
or do we need to wait through the summer for the Bulls to take command
again? In either case, most of the damage has been done already.
I have a schedule to provide full
updates on each one of the current followings, and plan to introduce several
new, recession proof ideas in the coming months. Right now, I'm working
on some very comprehensive and eye opening content on eFoodSafety (OTC
BB: EFSF), and NightHawk (OTC BB: NIHK) will be next. Spicy
Pickle (OTC BB: SPKL) gets plenty of coverage with its consistent news
flow. PhotoChannel (OTC BB: PNWIF) was covered this past week, and
TraceGuard
(OTC BB: TCGD) should have something to say pretty soon, and Titan's
(OTC BB: TTGLE) disaster has been well chronicled.
On the large cap side, I'm looking
for Apple (NASDAQ: AAPL) to shed another $17 to be a mortgage
the house type screaming buy, and today's edition will serve as your update
on Cree (NASDAQ: CREE).
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I'm Getting
CREE'D |
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There was a ceremony in San Diego's
Balboa Part last weekend. His Honor, Mayor Jerry Sanders held an event
and declared Balboa Park a "green zone". What changed? the city replaced
2400 lights in Balboa Park with LED Bulbs. The movement is here.
LED Bulbs- an acronym for
"Light Emitting Diode", are the new wave of lightbulbs destined to replace
the incandescent bulb. In the 100 year plus history of the incandescent
light bulb, there have been no major technological changes. Incandescent
bulbs are inefficient energy gobblers with environmentally harmful components.
Enter the LED- instead of
a filament, the LED has a little microprocessor chip and a reflector.
These bulbs last 15 times longer than an incandescent bulb, and use 85%
to 90% less energy. They cut power bills down quite dramatically as lighting
often represents the signal biggest component in power consumption.
Other countries around the globe
are ahead of the US in evolving to LED lighting, and many are starting
to mandate the transformation over the next 5 to 10 years. With the distinct
possibility of a more liberal, environmentally friendly administration
taking over the Presidency, the US might not be too far behind.
The big problem with LED-
it's expensive. Typical LED light bulbs can run up to $25.
Even at that exorbitantly high price, the consumer gets a great return
on investment over time, but most are unwilling to commit the upfront cash.
Prices will come down in the coming years and the technology evolves.
Here's where CREE comes in.
CREE
owns the chip technology. There are a number of manufacturers of these
bulbs, but they are incorporate CREE's technology, and
CREE gets
a little revenue of some sort for every LED bulb manufactured on Planet
Earth. CREE also manufactures micro processors for other light related
applications- i.e. cell phone lcd screens, computer monitors, etc.
So, why am I feeling CREE'D the
days? Because I'm not at the party. Shares of CREE have been trading
just great against all odds related to market conditions, and I don't own
any. I chose to sell mine at about $28 on the last surge, figuring
the I could buy it back on one of these ugly days where the market
sells off irrationally on some headline.
As you can see from the chart, CREE
closed at a three month high on Friday. This stock is giving off very bullish
signals right now. They delivered $120 million last quarter, and
$6.6
million of that was profits. The numbers were pretty much in line with
analyst's estimates, but CREE surprised the Street by delivering
a very upbeat out look for sales and profits in calendar 2008.
On Friday, CREE announced
it was buying an LED Lighting manufacturer for $100 million
in cash. CREE officials stated revenues would be higher,
but earnings would be down in the near term. Typically, shares of an acquiring
company go down when they announce an acquisition (see Microsoft/Yahoo).
On Friday, shares of CREE were actually up $.42 on the day.
The stock is hard to buy at this
point in time as it has streaked up the charts, and is very volatile. It
moves in pretty big chunks. The chart tells me to have some patience and
discipline, and wait for a pullback. $29.30 would be a good level
to take a small position, with an eye towards adding to the position if
you see $27.30- which would be ideal.
One thing is certain. The performance
of CREE suggests to me that "GREEN" themes can trade well
even against the backdrop of this Bear Market. This might be a great place
to look to make money.
The 2 billion people in China and
India who's new found enthusiasm for the 21st Century lifestyle are driving
up the prices of energy related commodities. With the increasing demand
comes increasing energy prices and pollution. Companies like CREE,
with their energy saving pollution mitigating technologies should pay off
handsomely in the coming months and years and demand for these technologies
skyrockets.
I will have a couple of microcap
ideas along these lines for you in the future. For today, CREE is
my number 1 GREEN idea. I'm just looking for a pullback before the
stock heads to $50 or $60 someday.
If I'm right about the stock, I'll
be able to afford the lighbulbs from my profits, assuming I don't get CREE'd
out of owning it.
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