Lightimes Online News and Resources for the LED and Solid State Lighting Industry and its Supply Chain

December 7, 2005...Funny things are happening on the USA stock scene. People seem to be pulling out of the heavy hitter, traditional blue chips stocks, and if they aren't stuffing their money into mattresses, they're putting it into companies that make real chips like those we cover in these pages. Companies focused on GaN-based products that produce or use real blue chips, like Color Kinetics and Cree, appear to be doing especially well. The communications side of the CS stock scene appears to be picking up a bit too, with Anadigics and Emcore as best performers.

USA investors also seem to be gravitating to government bonds. They are plowing their Republican-induced tax windfalls back into the current regime's coffers in an attempt to defray the USA's growing deficit. Leaning heavily in the opposite political direction, my personal respect goes to those who invest in CS and SSL-industry Nasdaq companies. My broker and I lean toward the big money management outfits (Warren Buffet want-a-bees) who pay actual dividends in the 9-12% range. I don't totally understand that game yet, but I prefer their results.

The game I do understand is the one that produces a steady rise in shareholder value of compound semiconductor (CS) and solid state lighting (SSL) industry-related stocks. That's what's in my little representative portfolio, about which I now report the first week of each month. For those who don't know the history of the portfolio (ref: editorial archive), I embarked on it in the spring of this year as a way of monitoring the overall health of the CS and SSL industries. To maintain journalistic ethics, I no longer cover the news regarding the companies I hold shares in and just take the opportunity to brag about, chastise, or rationalize their "progress" (or lack of it) once a month in this space.

The portfolio consists of 13 representative stocks that trade on the Nasdaq exchange. After so many years tracking these companies, most are simply nostalgic favorites. All are traded over the USA's Nasdaq exchange. Listed by symbol, they are (in order of original purchase: EMKR, CREE, TQNT, CLRK, ANAD, JDSU, SPIR, RFMD, KOPN, WJCI, VTSS, AIXG, AXTI. All were purchased at what I felt was their rock bottom low (smart me). Some of them went even lower, but hey, if I could pick 13 winners out of 13 I'd be famous. And FYI... these are longterm holds simply for the reporting opportunity. Readers should do their own due diligence before any investing. If the portfolio makes me some decent return in the longrun, great. (I only own 100 shares of each). But the investment climate in the USA continues to be such that my little CS/SSL portfolio continues to outperform the heavy hitters each month, that indicates to me that maybe the financial field is beginning to see the CS/SSL light. Wonders never cease.

The big winners this month seem to be Color Kinetics (CLRK), Anadigics (ANAD), Cree (CREE) and Emcore (EMKR). I purchased my CLRK stock at $11.27. That pricetag as of early today is $15.27. I purchased ANAD at $1.51 and it hit an impressive $6.41 today. The CREE stock was purchased at $24.27 and it's up to $27. I bought Emcore (EMKR) at $3.63 and as of today it weighed in at an impressive $6.93. Balancing the scales in the other direction, the stocks that I purchased most recently, WJ Communications (the old and original Watkins Johnson that trades as WJCI), the original star of GaAs, Vitesse (VTSS), and the valiant German-based Aixtron that made its debut on Nasdaq with the acquisition of the USA firm Genus are all down a bit from what I truly thought were rock bottom prices. But then, they only slip by pennies at a time.

So let's look at the four stars of the month, CLRK, ANAD, CREE and EMKR.

Color Kinetics (CLRK) just keeps bring in the cool contracts. A dominant SSL player from the outset, it keeps leaving its competition to pick up the crumbs while they bring home the bread... and the bacon. Their latest high profile installations of innovative solid state lighting systems include the sets of the USA's "Tonight Show," CNN's Washington DC Newsroom and The Situation Room, MTV "Total Request Live," and "The X Factor" which is one of the UK's top-watched entertainment programs with an estimated 10 million viewers. CK's systems will also light the globally anticipated "Final Draw" ceremony for the 2006 FIFA World Cup, which will be broadcast in 145 countries on December 9 from Leipzig, Germany. Cool pictures can be found on CK's website.

Also as a sign of maturing as a company, George Mueller, who co-founded CK in 1997 and served as chairman and CEO for eight years before transitioning the latter role to Bill Sims in 2005, will continue as CK's active chairman throughout '06; after which he'll concentrate on his role as "industry evangelist." George is co-chair and keynoter of our upcoming Solid State Lighting Suppliers Forum (SSLS 2006) May 9-11 in Taiwan. George Mueller was a contributor to at least 20 of CK's core patents. My advice is to be there and get to know this true tech champion. What he's doing, and has done, reminds me a lot of Intel's co-founder Gordon Moore who continues to evangelize at a healthy 75. I had the pleasure of working with Gordon back in the '70s in Silicon Valley. He and his wife Betty, have a foundation now, dedicated to developing outcome-based projects that will improve the quality of life for future generations. I can't wait to see how George Mueller leverages his assets in the future.

Cree remains our poster child company. They scored an impressive S&P report recently in Business Week, proving that the outside world is tuning into our world progressively more, with a fair amount of accuracy. Cree's strategy of winning share in white LED cell phone backlight applications has evidently continued to gain them momentum. Their progress on the 3” wafer conversion continues, and they seem to be doing well in lighting, power and communications. Cree has brought on some new managers recently, all of whom fit well with the traditional corporate image: ultra-cool.

Anadigics (ANAD) and Emcore (EMKR) both turned in a fine rise since my original purchase of their stock. These two are definite pet stocks, and their progress is representative of the slow rebirth of the communications market. Anadigics is continuing to rise in revenue and marketshare for their wireless products including: GSM/GPRS, EDGE, and WCDMA handsets as well as broadband and WiFi sales. And hey... their "loss per share" is estimated to improve by 35% by the time they wind up 2005. Emcore's business is picking up as well. Like Anadigics, there's no earthshaking news, but both are looking solid from my point of view. Emcore wisely keeps its eggs in lots of baskets and doesn't seem to miss owning the TurboDisc division as much as former Emcore employees do. All three of the Emcore's operating segments; fiberoptics, photovoltaics and their CS materials and device foundry recently posted revenue increases.

And don't forget that Emcore still owns 49% of GELcore, their joint venture with General Electric Lighting. (Named for GE Lighting + Emcore). We don't hear much from or about GELcore, but they're notorious for doing things and keeping a low profile. Thanks to Emcore's reporting, we learned that GELcore returned to profitability during this quarter with the completion of the manufacturing move to Mexico. Emcore's share of GELcore's income amounted to $591,000. If you do the math, that makes GELcore rising steadily and impressively income-wise.

The rest of the stocks in the portfolio were up slightly over their original purchase price, with the exceptions noted above. Overall, the health of the pack seems good. We'll see what happens by next month. In the meantime, stay warm and start enjoying the winter holiday season.

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This Month's CS/SSL Industry Stock Winners are CK, Cree, Anadigics and Emcore

Omron Develops Thin LED Backlight ModuleLIGHTimes Staff

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