Once in a lifetime Opportunity!

The light bulb was invented about 130 years ago and ever since its debut, the light bulb’s design hasn’t changed, that is until NOW. 2007 will be the year of the LED, also know as solid state lighting. Light Emitting Diodes are pea sized solid chunks of semiconductor material, like the Intel Pentium processor in computers, that glow when electricity is applied. Up to now light bulbs have been glass vacuum tubes with a glowing tungsten wire inside, just the same as when Thomas Edison designed them more than a hundred years ago. LED’s are going to soon displace the old vacuum tube light bulbs; they are 100 times smaller, 10 folds more efficient, and practically last forever.

LED’s have been around for more than 50 years and they are currently in multiple electronic devices in the home, just look at the power “on” indicator on your T.V. or any other common home electronic device and you’ll probably see an LED light indicator. So why is it that they have been around for decades but haven’t replaced the conventional vacuum tube light bulb? The answer to that question is easy; until recent advances in materials engineering, LED’s were not bright enough and too expensive for general lighting applications. But now, advances in technology coupled with more efficient manufacturing methods have yielded the solid state LED feasible for general lighting applications.

The great thing about this entire story is that we are in the midst of an energy shortage and most electricity grids in the U.S. are working at overcapacity. LED’s offer a real viable solution to help ease the energy strain, because as you remember, they are more than 10 times more efficient than conventional light bulbs. This fact alone makes them less likely to be sensitive to the general economic climate, because they offer an alternative to building more nuclear or coal burning power plants. Power plants take years to build and nobody wants them in their backyard, but changing the conventional light bulbs in our homes and businesses with more efficient LED’s is a very painless option.

Our number one stock pick for this sector is Color Kinetics, CLRK, listed on the Nasdaq stock exchange. The company holds the worldwide patent rights to the technology in controlling the color output of LED’s. This is important because one of the advantages not yet mentioned in this article about LED’s over conventional light bulbs is that each lighting fixture can output close to 5 billion colors. That’s right, with a single bulb, called a “node”, the color and intensity output of the light fixture can be controlled electronically. Just like the dimmer switch control on some present lighting systems, but with far more intelligence and capabilities. That’s why LED lighting systems are called “Intelligent Solid State Lighting”; they can be programmed to do almost anything.

We are confident that CLRK has strong fundamentals, good management, and huge market opportunity. Usually these are the winning traits of a “triple digit gainer” and we therefore predict a price appreciation in the hundreds of percent in 2-5 years for this company. This company’s success lies in its patents and their ability to hold up against infringement, and they have successfully fought and won court cases against patent infringers in the past. In addition, multiple leading companies in this business segment have signed licensing agreements with CLRK already, and the revenue from these royalties should begin to show up on the bottom line in the second quarter of 2007. Unlike the manufacturers of the actual LED’s, CLRK is not levered to the outsourcing of manufacturing to China or other places because they are a “fabless” company with a business model that is based on royalties from their intellectual property. And in the 21st century, that’s the sweet spot to be in!