Viva la LED Revolucion...

Written By Brian Hicks

Posted May 27, 2011

We’ve been talking about LED for years… and for good reason.

We knew the day would come when energy efficient bulbs would take over…

It was December 21, 2008 when we first 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 $80.

Sure, the naysayers would have had you believe the LED run was over at the time. But we were talking about a market with 388% growth potential, a market expected to exceed $1 billion by 2011, a 388% jump from a 2005 market value of $205 million.

And we weren’t the only ones that saw 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, said the Wall Street Journal at the time. “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.

Plus, in announcing the latest energy efficiency efforts, Obama said one of the new steps is to set new efficiency standards on fluorescent and incandescent lighting. “Now I know light bulbs may not seem sexy,” said Obama, “but this simple action holds enormous promise because 7 percent of all the energy consumed in America is used to light our homes and our businesses.

“Between 2012 and 2042, these new standards will save consumers up to $4 billion a year, conserve enough electricity to power every home in America for 10 months, reduce emissions equal to the amount produced by 166 million cars each year, and eliminate the need for as many as 14 coal-fired power plants.

“And by the way, we’re going to start here at the White House. Secretary Chu has already started to take a look at our light bulbs, and we’re going to see what we need to replace them with energy-efficient light bulbs.”

But to understand why it’ll pay to be bullish on LED technology stocks, we have to go back to December 2007.

That’s when President Bush inked an 822-page energy measure that included a future ban on 100-watt incandescent bulbs by 2012.

It was intended to make way for bulbs that use 25% to 30% less energy, lop an estimated $18 billion off annual U.S. electric bills, and cut consumer electricity usage by 60%.

Even American Technology Corporation CEO Richard Prati agreed, 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 we weren’t talking about small industry growth either. In 2005, the LED industry was valued at $205 million. It could be valued as high as $1 billion — 388% growth.

There’ll be plenty of demand, and possibly tight supply, which will benefit LED companies very well going forward.  Play it if you’re smart.

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