Huang is making a big concept bet here: he sees Cree as a bet that LED-based lighting (LED stands for light emitting diode) “is the best available” lighting technology in the market today with respect to efficiency, cost, useful life and the environment. “Similar to the trends in solar and ethanol stocks, we believe the LED lighting market will emerge as the next ‘clean energy’ investment trend,” he wrote in a research note.
We believe this story is a long-term, fundamental, secular growth story, with technology that it the proverbial ‘game changer.’
Huang thinks there will be legislation at the federal level this year “to limit the use of incandescent bulbs and eventually to eliminate the use of incandescent bulbs.” Adds Huang: “Once the legislation gains more publicity, investor attention will inevitably focus on ways to monetize this secular growth trend.” Like Cree.
Huang points out in his piece that the stock is not well-liked on the Street; of 12 analysts who follow it, just four rate it Buy or Strong Buy. He also notes that there is a substantial short position in the stock. Friday, though, Huang has given the stock a big boost.
