“LEDs are the Future of Lighting”

By Travis Johnson, Stock Gumshoe, July 12, 2007

Now this is a good opening:

“If you missed out on Google at $85. . . Crocs at $15. . . or Akamai at $4. . . This little 40-cent stock can help you forget those misses forever.”

That’s from Tobin Smith’s ChangeWave MicroCap Investor, and this teaser has been circulating for a little while and has been debated over at the forum a bit, but the consensus has been reached on the solution so I thought I’d share it with the broader group here.

The teaser essentially says that if you loved Color Kinetics and Cree, you’re going to really want to get in bed with this little 40-cent stock. Like CLRK and CREE, it’s in the LED business, and LED is a hot topic these days — not only because folks like Philips are buying up LED companies and capacity, but because of the huge opportunities for energy savings by replacing conventional light sources with LEDs.

The bombast is pretty solid in the teaser — incandescent bulbs banned in Europe, Australia and Canada, probably phased out in the US … what will take their place?

Smith thinks you have to get into this stock in the next 90 days because PG&E, the California utility, is going to roll out a campaign to give rebates for LED use.

So … these LED bulbs will in all likelihood be made by Philips, but Smith says they’ll actually be manufactured by his teaser company.

Which is (again, can’t take credit for this one — it was sniffed out by a few readers who emailed me, and on the forums) …

Lighting Science Group Corporation
(LSGP on the OTC market)

Hasn’t had a great day today, but it is up a bit from the 40-cent teaser, you can buy it for 50 cents if you’re so inclined. A few things to note:

This is an acknowledged hot market, with tons of companies trying to make a killing at it. LEDs have been around for quite some time and I can’t see that anyone has a proprietary technology that’s going to make them stand out — or at least, not a tiny, severely unprofitable company like this one. That’s not to say I’m right, certainly little microcaps with a good idea often burst into prominence, but it would seem very odd to me if a company grew into greatness by doing private label manufacturing for a few big light bulb companies.

The company does claim to have some protection in their niche by way of market leadership and patents, here’s a quote from a press release:

“LSG is the first company to market a high-output, dimmable, Edison-base white-LED light bulb. The company currently has 25 patents in the LED lighting space and a product portfolio comprised of 30 different SKUs. Lasting up to 50 times longer than incandescent light bulbs, LED bulbs typically pay for themselves in less than two years and do not contain the hazardous materials such as mercury that is commonly found in fluorescent and compact fluorescent products.”

So, that sounds fairly impressive. I can’t help but think that if their technology is really that good, they’ll be bought out by someone since they’ve got less than a half million in sales and seem pretty far from being profitable at the moment. mgpf over at the forums called this a “piece of crap on the edge of bankruptcy”, so Smith’s assessment is not, at least, unanimous.

Let us know how you feel about this one, I do own shares in Universal Display (PANL), which is an OLED company trying to create the next wave of Organic LEDs for display and lighting, but I don’t know much about the current LED generation.

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