Click chart to enlarge We promised we'd ferret out the material suppliers of the LED market, so here's one stock for you to look into. Rubicon Technology (RBCN) makes innovative crystalline products for LED applications. Unfortunately, it's not easy to put a price on the stock, as the company is in the red. It is expected to become profitable sometime this year. We'll file this one as the most speculative one of our "4 horsemen of LED". We don't normally buy large positions in stocks of companies that aren't generating profits, but we wouldn't mind gambling on this one with a small percentage of our portfolio given the potential of the entire sector.
RBCN is currently trading near the bottom of its channel, making it attractive on a technical level. VECO is supposed to be reporting earnings on Feb 8th, with RBCN reporting on Feb 9th.
We'd like to have about 1/3rd of our portfolio in the LED stocks before these earnings release dates. It would not be suprising if these stocks sold off just prior to their respective earnings releases. When an uptrending high-momentum stock sells off strongly just prior to earnings, we see it as a rare opportunity to sneak on board the train.
12 comments:
Just bought a 5% starter position in VECO at $34
"We don't normally buy positions in stocks of companies that aren't generating profits" Сorrect!!! Rubicon is a hole. Management = 0.
Snotwheel, congratulations on your foresight regarding your CREE investment, and the LED industry in general. It's not the decision to focus on LEDs that impressed me so much as your timing. Like you, I agree that there is still a lot more upside to the industry. Indeed, things are just beginning to warm up.
I saw where VECO was getting a nice grant from Uncle Sam. I understand they have the technology and a game plan for bringing down the cost of making an LED. That would be the key to the flood gates for the LED market. Do you know of a website where one can learn about how an LED is made? I'm particularly interested in the materials that go into an LED bulb.
On a side note, SAM Advisors, William Smith's investment advisory firm, filed a schedule 13G w/the SEC yesterday. They purchased an additional 1,284,680 shares of Vu1 for a total of 9,722,209 shares, a 11.32% stake in Vu1. When people smarter than me (most investors) invest in stock I'm invested in, it makes for a good confidence booster. I wish them well :O)
DD,
You're right that it's easy to select a sector and research it and focus on it, but still hard to actually pull the trigger. We used to be horrible at buying, usually waiting too long. We've learned to just bite the bullet and get in the game. Still hard, though. It must be the fear of getting in right before it (or the market) plunges that makes it so difficult. If you just keep in mind how much less risk there is when you buy lower, it makes it easier to buy.
We've found a lot of websites about LED manufacturing, but none in particular that stand out from the others.
Congratulations on the boost from SAM advisors. They have a controlling stake (voting rights) in the company now. Hopefully they put them to good use.
I like AIXG and RBCN wherever they are right now, but I don't like VECO and CREE.
Just bought more VECO at $33.
Why don't you like VECO and CREE, seeer? Or is it just that you don't like them for techincal reasons right now?
It's true that CREE and VECO are not correcting as much as AIXG and RBCN, but this is a sign of relative strength.
I don't like them, because the momentum to the upside is weakening. Of course I could be wrong. I would wait for a bigger correction.
Most everyone feels that a correction is inextricable, but I think it's just as likely that we have an extended flat period where the market just putters along horizontally for a while. During that time we'll have some bad days like today and some better days. So in a sense the stock market may slow down to let the rest of the economy catch up. If that were to happen, then now is as good a time as any to pickup these LED stocks. Small cap growth stocks touting new technology like these often fair better than the market as a whole during such times. It's just a matter of watching closely and picking a good entry point.
Vu1 posted a new video demonstrating their ESL technology in 2 new bulbs, an A-style bulb (traditional household light bulb) and the popular European style R80:
http://www.vu1.com/ESLupdate/
They are continuing work on reducing the size of their R30, which will be their first product coming to market later this year, and the development of the 4' tube style bulb.
DD,
Thanks for the video. It does look very promising. Do you have experience buying penny stocks? We haven't dabbled in it much, but no doubt the potential is enormous. All it takes is one nice plug in the media and vu1 stock could double or triple in a day or two. Do you own any? How long do you plan on holding it? More importantly, do you think the company is large enough to gain enough market share to hit the radar screens of fund managers? Do you think vu1 has the potential to meet demand considering how quickly this demand will be thrust on these companies?
Snotwheel, when I was a less experienced stock investor I dabbled in penny stocks. With experience comes wisdom (or so we'd like to think). Penny stocks are too much like gambling. Too many uncontrollable variables.
I made a lot of money on one once, but it was more due to luck than skill. It was skyrocketing up over about 3 days. I was ecstatic. By the 3rd day I returned to thinking and wondered what could possibly legitimize such a rise. I searched for every bit of info I could find and there was just no substantiating the share price. So I got nervous and sold. The very next day the stock crashed. It turned out to be a typical penny stock BS ride. It was supposed to be some kind of nano composite to be used for armor in flack jackets and military vehicles. It turned out to be nothing more that a legal proceeding with the SEC.
Having said that, my attitude toward penny stocks is to always keep an open mind, but to never invest unless some serious due diligence convinces me that it is a good, relatively stable investment, and I set that bar real high. Vu1 is the only one of 2 penny stocks I've invested in in many years. The other stock I invested a little money in thinking--to make a long story short--it'd go up before it went down and I'd sell after it went up a bit and I'd turn a little profit. It didn't work out that way, it just went down, but thank god I had the sense to get out before it really crashed. I bought 10,000 shares at $0.59 and sold at $0.51. It's now at $0.07.
So obviously Vu1 met my criteria and I've been following it like a hawk now for 1 1/2 years. Yes, I have a fairly large position in Vu1. I'll just say over 100,000 shares, which is large for me. I'm averaged in at $0.60. My time horizon all depends on what the company does. Generally speaking, I will probably hold what I've got until around the time they do their product launch, hopefully this summer. I intend to take some profits at that point, then play it by ear.
There are already a few funds with a small investment in Vu1. With the addition of SAM Advisors, which I believe is a direct investment by the company rather than for a fund or funds,
(SAM Advisors LLC: 9.72m shares (11.32%))
there is:
Pacific West Financial Consultants: 2.62m shares (3.06%)
Pennsylvania Trust Co: 10.00k shares (0.01%)
Janney Montgomery Scott LLC: 10.00k shares (0.01%)
But more to your point, here's what I believe. There's a strong likelihood that Vu1 will be bought out before they have a chance to expand. If the product launch goes well and the interest is strong, from the media, the market, and consumers, I expect one of the larger companies will buy them out.
Vu1 did a smart thing. Not only did they patent their lighting technology, but they've also applied for a patent for their manufacturing process. Their CMO, Ron Davis, told me that the manufacturing process will probably prove to be more valuable than the bulbs themselves. This gives them a lot more leverage in any takeover bids. Potentially, the investors could either make a large profit quickly, or an even larger profit over the long term. The quick profit would be guaranteed where as the extended timeline holds more risk along with the additional rewards. I'll start a new post...
As for why I have such strong confidence in Vu1's success, here are a few of the primary reasons, particularly from an investor's viewpoint.
Besides being convinced that the technology is good and that there will be a demand for the products (it's an ideal product at the ideal time), provided they can get the spot price low enough, I give a lot of weight to the quality of the personnel involved in making this work. They have very impressive bios and could all be making a lot more money than they are now fooling with Vu1. Most have been with the company for over 5 years and most are older. So I see that they're risking their financial futures on this "project," so these smart, well-educated gents must know they've got something special here, something that gives them great confidence that it will make them rich in the long run.
So I have confidence in the technology, the Vu1 team, and the likelihood that their introduction to the lighting world will create a big stir. The only thing I'm uncertain about is how well this technology will go over with the buying public. But as an investor, I have the advantage of being in a position where I can make money whether the product takes off or not simply because, as you pointed out, the stock will certainly gain tremendously before the jury is in on whether or not the product sells, and unless they suddenly cease all operations--and I have many reasons for knowing that won't happen--an investor can hardly lose. Just make sure you take some profits before the world makes up its mind on ESL.
Response, Snotwheel?
Post a Comment