Tom Konrad has written about two LED companies that he thinks are worthy of a speculative investment.   His views are always worth considering.   He wrote:

Cree, Inc. (CREE), and Lighting Science Group (LSGP.OB).

I’ve been invested in both of these for a long time, and last wrote about these LED stocks in June. I sold half the holdings of many of my managed accounts soon after that article when CREE was around $27-$30, about double the price at which I’d bought them. Smaller positions in Lighting Science Group have followed a similar pattern, mostly due to buyout speculation in LED stocks, with only modest gains over the last year as speculation has died down.

Yet the fundamental reasons to be bullish about LEDs are stronger than ever. This Christmas season was the Season of LEDs in more ways than one. In my personal experience, I went to Target on December 15 to get another string to add to the ones I’d bought last spring, and found that they were totally sold out (although conventional lights were well in stock.) I left empty handed, but I expect that Philips (PHG) (another holding), will report LED sales well above expectations this quarter.

Also, while solar stocks may suffer with tax incentives removed from the recently signed Energy Bill, the bill did contain a “Ban the Bulb” provision, phasing out incandescent lights by 2014. Lighting Science saw a 20% jump the day it was signed, but it’s still way down from its highs last summer, and Cree didn’t budge. It’s true that most incandescent bulbs will probably be replaced with CFLs, but LEDs work better in several sorts of applications: they are dimmable, work better at low temperatures (such as in freezers), and are more tolerant of vibration. Thus, the new law provides a practically guaranteed, large market.

I’ll be surprised if both these stocks don’t see significant run-ups sometime in 2008, and Lighting Science could easily see one soon after the New Year, due to the publicity they’ll be getting in Time Square on New Year’s Eve. Most likely, we’ll have to wait a little longer than that, but even without a run-up or buyout, I see these two as good long-term bets.

For hard-core speculators, one LED penny stock that you might look at is Cyberlux [CYBL.OB.] Cyberlux was brought to my attention by a reader the last time I wrote about LEDs. I looked into it again last week, but decided not to invest because of the large overhang of convertible debt. In my analysis, it will be virtually impossible for long-term shareholders to profit because of the expected dilution due to the convertibles. That does not mean that short term traders might not make a killing (or lose their shirts.) For more on Cyberlux, go to this message board (run by the reader who brought the stock to my attention.) There’s a lot of information there, although I don’t know if its accurate.

Tags: energy investments

This entry was posted on Thursday, January 3rd, 2008 at 11:13 pm and is filed under Conservation, Cree (CREE). You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.