Lighting news for investors

The lighting business is changing rapidly and that is creating opportunities for investors. Traditional companies are adapting rapidly or being left behind and new-tech companies are proving their worth or having short lives. Innovation is rampant and there is no clear technology or industry leader yet.

+Incandescent light bulbs are 130 years old, waste 90% of the energy used as heat rather than light and are on the way out in the U.S. The last plant making the bulbs in North America is closed. Companies in the lighting business are very much on-board with the change and ready to move forward.

+Rep. Joe Barton of Texas has introduced a bill to repeal President Bush’s energy efficiency standards but it is getting no traction. Others will try to get around the new reality in different ways-one German businessman is trying to sell incandescent bulbs as “heat balls”. Expect more creative sales techniques as the phase-out deadlines get closer.

+There is no single leader in the battle to replace the incandescent bulb. Compact fluorescents(CFL’s) are an established technology with a low price-point but contain mercury and other toxic components. LED’s are growing in popularity but are still quite expensive even though their long working life makes them cheap over the long-term. High intensity discharge(HID) metal halide bulbs have some advantage of their own for certain application. Combinations of the above are beginning to appear(halogen-CFL by General Electric). Organic light emitting diode(OLED) technology is just beginning to enter the lighting field and should have advantages in some areas.

+Research and innovation will continue. General Electric now has an LED bulb that uses jet engine technology to cool the LED’s instead of aluminum heat sinks. New technologies and new applications of existing technologies will allow new lighting products to come to market. There might never be just one “standard” type of light such as the incandescent bulb was for so many years. And that is not necessarily a bad thing.

Adapting firms that will retain a strong presence in the lighting industry are General Electric(GE) and Philips(PHG). The strongest player so far in the LED lighting field is Cree Inc.(CREE). Others in the industry are all jostling for position. A very large and unanswered part of the equation is consumer sentiment and how the public will spend its dollar/voting power. There will be more than a few winners and early investors, as always, will reap the greatest rewards.

"Green" mining investments?

Mining is one segment of my “green” investing strategy with which some might not agree. I would argue that mining is absolutely essential to most “green” technologies, including wind power, solar power, super-conductivity, advanced battery designs, highly efficient LED lighting and smart-grid just for a start. Without the metals and other diverse elements supplied by the mining companies of the world, modern electronics and “green” technologies would not exist. Silver and gold, copper and iron have always been important to the electronics industry. Just as important to modern semiconductors are the “rare earth” elements.

The rare earth elements are not really rare but are quite common and well distributed in the earth’s crust. They are, however, fairly difficult to purify into usable form. The rare earth group consists of 17 elements mostly in the lanthanide series of the periodic table. They most commonly occur in nature as oxides and are often intermixed at the same location. Highly-concentrated deposits suitable for mining operations are well distributed around the planet.

The problem today is China’s domination of rare earth mining and production. China now produces over 97% of commercially used rare earth elements. This situation came about because Chinese production was cheap and rare earth elements were an excellent export commodity. The rise of the native Chinese electronics industry increased domestic demand for rare earths. China is in the process of stopping export of these essential elements.

The need for more locally produced rare earth elements is putting a spotlight on mining and refining companies capable of replacing Chinese supply. There is no shortage of these companies and most of them are quite “cheap”. When the major electronics producers start feeling the pinch of reduced Chinese rare earth export policy these mining companies are in a position to see rapid, long term growth and share-price increases. A few of the companies I watch most closely are Great Western Minerals Group(GWMGF), Avalon Rare Metals(AVARF) and Sociedad Quimica Y Minera(SQM).

Let me reinforce the importance of the rare earth elements to “green” technology. These elements are used in almost all semiconductors including photovoltaic and PETE(photon enhanced thermal emission) cells. Rare earths are absolutely necessary for the strong magnets needed for efficient wind power and hydroelectric generation. Low-temperature superconductors require rare earth elements. LED lighting depends on rare earths. Many lasers, high-refractive-index glass formulations, colors for phosphors and LED’s and glass, fluorescent lamp bulbs, ceramic capacitors and portable x-ray machines all depend on rare earth elements.

My view is rare earth mining and production companies outside of China are a great short- and long-term investment. They should do nothing but continue to increase in value and share price(unless bought by a larger or wealthier competitor). Our part as “green” investors is to push them as hard as we can to make their mining and production operations as “green” as possible. It is also our responsibility to push the EPA and all other responsible government bodies with oversight authority to do their duty and ensure all rules and regulations are followed.

More efficient lighting with LEDs

The future of lighting, all kinds of lighting, is LED’s. Only a major and totally unanticipated discovery would prevent LED’s taking the place of incandescent and fluorescent lighting during the next five years. LED’s will soon dominate the lighting industry because they are much more energy-efficient, they stay cool, they are small and light-weight, and they are more earth-friendly to manufacture and dispose.

Energy-efficiency and operating temperature are closely linked. Incandescent light bulbs waste approximately 90% of the electricity used producing heat instead of light. Fluorescent bulbs waste nearly half of their power as heat. LED’s produce light with more than 90% of their electrical draw. This enormously reduces the amount of energy needed to light an area while also reducing the energy needed the keep that same area cool. The lights themselves are now quite expensive but the energy savings will make up for the price difference. Prices will rapidly decline as demand and production increase(remember how “expensive” compact fluorescent bulbs were when first introduced?).

Longevity is the LED’s forte. Most currently being sold will last at least five years if never turned off. For most businesses, changing dead light bulbs is a daily or weekly(at least monthly) necessity. Switching to LED lights could allow a maintenance department to forget how to change a light bulb. How many saved labor hours, reduced storage space and inventory could this be worth to the average business? How much aggravation and space could be saved in the average home?

These are the reasons for the “LED Section” of my investing watch-list. I now monitor: Cree, Inc.(CREE) of Durham, NC; Veeco Instruments, Inc.(VECO) of New York, NY; Carmanah Tech Corp.(CMHXF) of Victoria, BC, Canada; XODTEC LED, Inc.(XODG) of Taiwan; Obelux of Helsinki, Finland and Bridgelux of Sunnyvale, CA. My not-so-secret wish is that Obelux and Bridgelux go public in the near future. These companies should all have a very bright future in the lighting industry.

Veeco Instruments makes the equipment other companies need to produce LED lights. Cree is one of the oldest and best established LED lighting manufacturers. Carmanah specializes in self-contained solar-powered outdoor LED lighting units. Obelux specializes in aviation and architectural lighting and has just announced a 200,000 candela white LED aviation marker light that is Federal Aviation Administration approved and uses just 350 Watts. Bridgelux is lead by ex-Seagate Technology CEO Bill Watkins and has already applied for over 250 patents covering various aspects of LED light production.

Stock market performance of these companies has been less than stellar so far. This is expected in with just-emerging technologies. As a greater variety of products becomes available, product prices drop and the importance of energy-efficiency increases, share prices of these companies should soar. I continue to wait and watch and monitor new developments within the industry.

Large private-sector companies and governments, led by the military, will undoubtedly be the early-adopters of large-scale LED lighting, followed by smaller companies and then individuals. Starbucks has already committed to making the switch in all of its stores. The U.S. Navy has committed to LED lighting on its combat ships. Many more forward-thinking organizations will soon figure out the many advantages of LED lights even at present prices. By the time they have to change the first dead light, replacement prices will probably have dropped by 60% or more and the initial investment will have been repaid several times over in energy savings.