Cree Inc. (CREE)
By Michael Cintolo, Vice President of Investments and Editor of Cabot Top Ten Report
From Cabot Wealth Advisory 11/12/09. Sign up for he free Cabot Wealth Advisory e-newsletter.
Cree Inc. (CREE): Strong and Liquid with Great Institutional Sponsorship
In today's environment, I'm looking for companies with great prospects, and with stocks that are not only strong but also liquid (they trade plenty of volume every day) and have great institutional sponsorship.
One name that's attractive is Cree Inc. (CREE). The company is technically listed as a semiconductor company, however, its claim to fame has little to do with the chip sector and its notorious booms and busts. Instead, Cree is really something of an alternative energy story-it's the leader in the production of light emitting diodes (LEDs), which are far more energy efficient than both standard bulbs and compact fluorescent lights (CFLs).
Here's what I wrote about Cree two weeks ago in Cabot Top Ten Report:
"Cree Inc. is a leader in the production of light emitting diodes (LEDs), which are the next wave in energy efficient lighting. They consume as little as 10% of the electricity that incandescent bulbs use, generate low heat, last far longer (estimates of 20 to 40 times as long) and, unlike newer compact fluorescent light bulbs, contain no mercury and require no special handling. LEDs have been popular for years in laptops and cell phones, but as the demand for electricity rises and the efficiency of LEDs soars, their applications are expanding, especially for outdoor lighting; for instance, Cree is supplying Anchorage, Alaska, with 16,000 LEDs. With 80% of the firm's revenues coming from outside the U.S., there's a good chance countries like China, which already makes up a big chunk of business, could replace millions of bulbs in the years ahead."
I like that revenue growth is starting to accelerate (up 5%, 9% and 20% the past three quarters) while earnings are booming (up 38% and 100% the past two quarters, with a 45% gain expected in the fourth quarter). And I love the fact that the story is simple and compelling-cost savings for lights makes sense, and demand for its LEDs should soar in the years ahead.
The stock popped on its earnings report on October 21, and has been bobbing and weaving with the market ever since. Right now, I think it's a bit extended to the upside, as the 50-day moving average is down around 40. But I think it's worth a shot at buying on any controlled pullback of two or three points.
Cree Inc. (CREE)
4600 Silicon Drive
Durham, NC 27703
United States
Phone: 919-313-5300
Fax: 919-313-5452
http://www.cree.com
Details:
Index Membership: S&P 400 MidCap, S&P 1500 Super Comp
Sector: Technology
Industry: Semiconductor Equipment & Materials
Full Time Employees; 3,172
Michael Cintolo
Vice President of Investments and Editor of Cabot Market Letter and Cabot Top Ten Report
A growth stock and market timing expert, Michael Cintolo is editor of Cabot Market Letter and Cabot Top Ten Report. Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable was his development of the proprietary trend-following market timing system, Cabot Tides that has helped Cabot place among the top handful of market-timing newsletters numerous times.