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LED Stocks Lighting Up: CREE

Brian Hicks

Written By Brian Hicks

Posted August 20, 2010

Cree is the buying opportunity of a lifetime.

I said the same about Interoil (IOC) years ago… and watched it spike from $20 to $80.

I also said it about Cree years ago… and watched the stock spike from $20 to $80.

But on a recent pullback sub-$60, Cree not only became the “buying opportunity of a lifetime” for the second time; it became an absolute steal — thanks in part to Home Depot.

It seems the fourth largest retailer in America just added LED bulbs to the shelves, allowing them to encourage “curious” shoppers to check them out.

But to really understand the explosive potential of LED technology and Cree, you have to go back to 2007, when Cree traded at a scant $20 a share…

Back in 2007, President Bush inked an 822-page energy measure that included a future ban on 100-watt incandescent bulbs by 2012. This energy measure intended to make way for bulbs that would use 25% to 30% less energy, shave an estimated $18 billion off electric bills, and cut consumer electricity usage by 60%.

As we said on the original Buy alert:

Even American Technology Corporation CEO Richard Prati agreed at the time, saying LED technology would grow “astronomically” in coming years. He even believed LED technology would proliferate like Internet companies did in the 1990s, and that LED could save consumers up to 90% on energy bills.

And Prati was right… just as we were.

I also said Cree would soon rocket from $20 lows to more than $80 — handing Pure Asset Trader readers at that time close to 300% in a couple years.

Cree Chart August 2010

I’m writing you today to tell you the opportunity to profit is still there.

You see, others may not be convinced of growth, taking the stock back under $60… but we are.

In fact we’re out with another Buy rating on the stock — with an $80 near-term target.

So why was the stock taken down, post-earnings? Because the outlook for the September 2010 quarter disappointed on weakness in the LED-TV back-lighting market.

But with general lighting sales (75% of total Cree sales) expected to explode in the double digits, Cree remains a solid growth story.

LEDs use much less electricity than incandescent bulbs, saving money in the long run not on both bulbs and utility bills. LEDs, according to Cree, use 10% to 15% of the power of an incandescent, and about half the power of a fluorescent bulb.

That translates into 50,000 hours of LED lighting — or 50 times longer than an incandescent light bulb, and five times longer than a fluorescent bulb.

Imagine how much money you’d save on power bills and bulbs with that kind of lighting efficiency…

The bottom line

Cree is a leader that needs to be in your portfolio. Gross margins are 17% to 22% better than the competition.

While Cree ran up more than 110% this past year, it’s still cheap with a growth rate of 22%.

Even Wunderlich Securities agrees, launching coverage of Cree with a Buy rating and an $85 price target in June 2010:

“The world of lighting is finally on the verge of being completely and utterly replaced by solid-state lights and Cree is leading the industry to make this happen,” they said. “With today’s focus on energy efficiency and the dramatic reduction in demand that can be achieved with conservation alone, using solid-state light emitting diode based light is considered by many to be the single most rational response a consumer can make. But replacing light bulbs with LEDs is only the first order response. The second is the replacement of all light fixtures, which opens up a whole new market.”

Wunderlich reiterated its Buy rating for Cree again this week… Piper Jaffray recently reiterated its Overweight rating and $88 price target.

This is the stock to own long term. Buy it. Own it. And hold it… until $100.

Stay Ahead of the Curve,

Ian L. Cooper
Energy and Capital 

P.S. Not just for Home Depot shoppers, LEDs are now being used to replace bulbs by major retailers and institutions: McDonald’s, Wal-Mart, and the Department of Defense are signing contracts with LED companies to retrofit stores, offices, and naval ships…

And as you read this, one tiny engineering firm is signing contracts for the retrofitting for these industry giants — adding to the reason behind this company’s 89% gains for this year alone. Read about how you can still get in on the LED boom — before this tiny company becomes a household name — in this brand-new report.

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