Energy conversion has begun...and there's still time to profit

By Ian Cooper
Energy and Capital

It was December 21 when we last spoke of Cree (CREE:NASDAQ) benefiting from the 2012 100-watt incandescent bulb ban announcement. Since then the stock has run from a $22 low to more than $35 - a 59% move that Pure Energy Trader readers benefited handsomely from with the underlying stock. And the Cree June 2008 25 calls gained more than 310% at one point.

But my purpose isn't to show off Pure Energy Trader gains. It's to inform you that the recent pullback sub-$29 is a prime buying opportunity.
Sure, the naysayers would have you believe the LED run is over. But we're talking about a market with 388% growth potential. This is a market expected to exceed $1 billion by 2011, a 388% jump from a 2005 market value of $205 million.

And we're not the only ones that see the potential here.
Walt Disney World has changed over to LED, wiring Cinderella's Castle with more than 20,000 LEDs and saving thousands of dollars.

The Times Square ball was lit with LED lighting, making it twice as bright and using half the energy.
The city of Boulder, Colorado, has switched to LEDs for its Downtown Pearl Street Mall.
Royal Philips Electronics is aware of the potential, announcing it was buying Genlyte for $2.7 billion as part of its LED company buying spree as it strengthens is energy-efficient lighting business.

London has launched an attempt to "become the first city in the world to be lit by LEDs . . . the city aims to install LEDs in all its streets within five years."

Even venture capitalists are lining up for a piece of the LED market, says the Wall Street Journal. "Many venture capitalists are touting the energy efficiencies of next-generation lighting, including start-ups using light-emitting diode, or LED, technology. LEDs, though more expensive than incandescent bulbs or fluorescent tubes, draw much less power, last for many years and contain few materials that are harmful to the environment."

Sure, the bulbs may be expensive to buy, but there are long-term cost benefits. When the President's plan to fully phase out 100-watt incandescent bulbs is realized, there'll be a switch to bulbs using 25% to 30% less energy. That alone could lop an estimated $18 billion off annual U.S. energy bills - a boon for companies like Cree.

Who knows, maybe all this will put pressure on GE to buy a company like Cree. Would it be a shock if a company wanting to guarantee a supply of LEDs came forward and paid Cree what it is worth?

The growth is there, my friends. You just have to pick up LED-related stocks early and cheaply enough before the Internet-type run begins.
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