Home Page : www.otcjournal.com
Email Questions or Comments To:
editor@otcjournal.com
To
OTC Journal Members:
 |
Cree (NASDAQ:
CREE): Truly Transformational Technology |
|
I have always preferred the microcap
arena where I believe my ideas have more value- you can find hundreds of
different opinions on AAPL. There was far less information easily
available on CPNE a year ago at $.50, or PNWIF a year
ago at $1.80.
I don't publish a lot of large cap
ideas, and I only publish them when I find something that I believe is
truly transformational in nature. With AAPL- for me it is deja vu
all over again. The iPhone is transformational, but iTV promises
to be to movies what iTunes was to music, and the market is much
bigger. iTunes to iTV- deja vu all over again. That's why
I believe the stock is going to $200.
I'm making a very nice score in the
Apple
(NASDAQ: AAPL) long term options I picked up last Friday as the market
started its latest rebound phase.
If you liked my suggestion to jump
into
AAPL at $93 back in March (currently $135ish), or even
one week ago at $124, you might like today's large cap idea as well.
Today's idea holds the promise of
being absolutely huge. The two items you see in this picture are very different,
but also very much alike. You are looking at an incandescent light bulb
and a dinosaur.
Thomas Edison is credited
with having invented the incandescent light bulb, but there were competitors
in the late 1800's. Historians will tell you the first successful light
bulb was demonstrated on October 22, 1879, when Edison got his then
current version to illuminate for 13.5 hours before it died.
Therefore, one might say the core
technology of the incandescent light bulb has been illuminating our world
for 128 years.
Much like the dinosaur, the
incandescent light bulb, which has lived a very long life and been dominant
in its world, it about to become extinct.
Did you know the incandescent light
is already being banned in Brazil and Venezuela? Canada, Australia (phasing
out by 2010), and Europe are close behind. The move to ban the incandescent
light bulb is on in the US, and other parts of the world. It is a huge
energy guzzler, and legislative agendas are starting to become reality.
In the short term, many believe the
CFL
(compact fluorescent light) will be frequently used as a replacement.
It's a fluorescent light that screws into the normal light bulb socket.
However, I have a couple in my house, and the lighting is very poor. Incandescent
lighting also has some environmentally unfriendly components (high mercury
content).
Enter the LED bulb. You see
it pictured here. Right now, they are very expensive. However, they last
15 times as long as an incandescent bulb, use 85% to 90% less energy, and
are much brighter.
As compared to the CFL, they
last 4 to 6 times longer, and use about 1/2 the energy.
The LED bulb is solid state,
and here's how it works. Instead of a lighting element that glows in a
gaseous enclosure, electrons flow across a semi conductor junction and
emit light. It is very bright light, takes very little energy. The drawback-
right now it is more expensive to manufacture.
CREE has lots of competition
in LED lighting. Phillips has been gobbling up smaller companies
in the LED space (TIR Systems and PLI), and stiff competition for
mobile applications (i.e. cars, mobile devices, etc) has been coming out
of Taiwan.
However, reports I have read indicate
the CREE technology is 30% to 50% more efficient than
that of the big boys in lighting: Phillips and Nichia (subsidiary
of Siemens).
Several analysts expect CREE
to have a competitive advantage in the general lighting market over these
larger companies, and therefore could be an acquisition candidate at some
point in the future. GE would be a likely candidate to take them
out at a big premium.
LED lighting is clearly the
wave of the future. Today, it is still expensive. Analysts believe it will
go the way of the computer chip- every 18 months for the foreseeable future
the illumination power will double and the cost will be cut in half.
If you are wondering about the numbers,
here you go. CREE delivers nearly $1/2 billion in annual
revs, and last fiscal year it equated to nearly $80 million in profits.
Profits were down a bit from the previous year as the company is investing
a lot of capital in LED lighting technology. At Friday's close,
the market cap was $2.4 billion. The PE ratio at Friday's close
was about 35.
As you can see from the chart, this
stock has not been immune to the summer sell off. It nearly doubled from
$16 to $30 April to July, then fell back in concert with the vicious August
drubbing.
If the stock had fallen all the way
to about $21.66, it would have been a heaven sent opportunity. However,
it didn't get beat up that bad. It only spiked down below $24 a
couple of times.
However, the stock is currently camped
on the second best retracement level- the 38.2% retracement level-
$25.07
for
this particular stock. I started out by picking up up 1,000 shares for
my IRA at $24.17.
Thursday CREE announced it
was tripling the size of its China based LED lighting manufacturing facility.
More evidence we might really be onto something.
Target price: $50 sometime
between today and the end of March of 2008. SSL: $22.25 (just under
the August low).
|
