The LED Revolution Could Change
the Way You See Forever

By Charles Delvalle

Dear Reader,

Every day, we’re surrounded by lights.

We wake up to them … operate all day around them … and turn them off before we go to sleep at night.

And the honest truth is we take lights for granted.  Nobody’s worried about having to live on fired-up whale lard.  And nobody looks to lights for an investment idea, either.

Well, let’s go ahead and change that.  Because as you’ll find out, lights can be one of the most profitable investment ideas you’ll see in the next few years.

How can lights be profitable, you might ask?  It’s all about technology.  And right now, the technology that lights up our homes has come a long way since the Edison days.

To make a case for light, let me clue you in on a little known fact: According to Forbes, lighting up the world takes up one-eighth of all electric power!

In fact, U.S. lighting alone uses half as much energy as is used by all cars on American roads.

So it’s clear that if you can make the light bulb more efficient, energy usage across the U.S. will go down.  To that effect, Congress has made the decision to mandate a switch from the old, inefficient incandescent light bulb over to fluorescents.

To give you an idea of how much more efficient fluorescents are, think of it like this: incandescent bulbs yield about 15 lumens (amount of light) per watt.  Fluorescents, on the other hand, yield 80 lumens per watt.

But I’m not here today to tell you there’s a bull market in fluorescent bulbs.  Quite the contrary, the bull market is in the technology set to replace the fluorescent bulb.

I’m talking about Light Emitting Diode technology (or LEDs).  LEDs have been around for a long time.  You see them in cars, remote controls, and most consumer electronics. And for a long time their efficiency in creating light sucked.  But years later, they’ve come a long way.

Today, you can find LED light bulbs that create 100 lumens per watt.  And 200 lumens per watt is about 18 months away (if that).  In other words, an LED bulb will generate almost three times the amount of light per watt as a fluorescent.

And the best part is, LEDs last a long freaking time.

According to Forbes, Incandescent bulbs last about 1,000 hours.  Fluorescents do better and last about 10,000 hours.  But LEDs last a whopping 50,000 hours (and soon that will double to 100,000)!

That’s enough to run your light bulb 24 hours a day for nearly six years straight!

This huge advancement in power savings and life is what’s making a lot of local governments drool at the prospect of using LEDs.

In the next two years, Anne Arbor, Michigan will be the first U.S. city to replace all of the city’s light bulbs with LEDs.  When the project is done, they expect electricity consumption for public lighting to drop by half.  That’s a reduction of 2,425 tons of CO2 every single year.  And it will take only 3.8 years for the project to pay for itself.

That’s just one city.

Some other cities that will switch to LED lighting include Raleigh, North Carolina, Austin, Texas, Toronto, and the Tianjin Economic Development area in China.  As energy costs go up, you can be sure that cities will continue looking for ways to cut back consumption.  And LEDs offer the perfect way for them to do it.

According to LED Magazine, annual global sales for the LED market last year were about $4.6 billion. But after LED lighting becomes more widespread, marketing intelligence firm iSuppli expect LED sales to reach $12.3 billion in just four short years!

In other words, this industry is set to grow by nearly 200% by 2012!

The only thing holding back mass adoption of LEDs is the cost.  Costs would have to come down by at least 75 percent for them to be competitive with other lighting.  But you shouldn’t wait for that to happen before you invest.

The move is starting now.  

There are a few companies out there that manufacture LEDs or provide producers with the equipment needed for them to make LEDs.  As demand for LEDs grows across the world, these producers will make serious cash.

Royal Philips Electronics (PHG) has one-fourth of their sales come from lighting.  Color Kinetics (CLRK) is another good one for you to look at. And if you want to get into a company that provides suppliers with the equipment to make LEDs, look to Emcore Corp (EMKR) and Veeco Instruments (VECO).

When I say the future is in LED lighting, I mean it.  And considering there’s a huge shortage of LED capacity out there, this market should keep lighting up your portfolio for a long time to come.

To your success,

P.S. I just started up a new blog and would love for you to check it out.  Just go to http://stockcharlie.blogspot.com/.  I’ll be giving you my unrestricted opinion on economic developments and the effect politics can have on the markets.  Make sure to comment and let me know what you think!

P.P.S. Just last week, readers of IDE’s Global Profits Hotline were able to capture 35 percent in just one day on a Toyota put.  And that doesn’t include the other gains we’ve made this year of 98 percent and 88 percent.  To find out how you can take part in these gains, click here ]

Market Watch

Ride or Slide: Silicon Image (SIMG)

By Charles Delvalle

This week, I got an e-mail from Pat G:

Thank you for the opportunity to ask for your review of Silicon Image, SIMG.  I like the debt to assets they have, the fact they subcontract out the production, the applications for the product they are providing and their relationships within the industry.  However, SIMG has gone down in price since I bought at $ 5.40.  Is SIMG a ride or slide?  I look forward to your review; I also enjoy reading your articles.

Well, Pat, I have one word to describe SIMG’s chart – UGLY.  They’ve dropped from $18.00 to just $4.50.

Taking a quick fundamental look, their earnings dropped 71 percent last quarter and revenue was down slightly, too.  But even with this drop, they are still at a P/E ratio of about 20.  That means they must have been really overvalued at one time.

Margins and return on equity are terrible too.  The only thing this company has going for it is that they are in a sector of the market that will see huge growth as set-top boxes, phones, and laptops keep getting bought by the masses. Plus, they’ve made a few strategic acquisitions that should help them out later this year.

I also like the fact that they have more cash than they’re worth and absolutely zero debt.  Their cash flow is also very, very good.

Pat, I have to be honest.  This one is a tough company to call.  I hate buying into stocks just because they’ve dropped a lot.  I normally look for an uptrend before I jump in.  On the other hand, I have a feeling this company could get taken over.  They’re cheap enough, have a good enough pipeline of upcoming products, and are positioned in a sweet little market niche.

I’m going to say this company is a ride, but make sure to keep a short leash on them.  If they hit a new low in the next month, be very careful.

P.S. Want to see me cover a stock?  Send an e-mail to feedback@investorsdailyedge.com

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