Four Growth Waves

04/21/2006 12:00 am EST


Tobin Smith

Founder and Chief Research Analyst, Transformity Research LLC

It's par for the course when Toby Smith uncovers an exciting "wave" or emerging trend, as you will hear at the charismatic advisor's his workshops or panels held in Las Vegas. A recent stock pick, however, is involved in "four hot growth waves at once."

"In our ChangeWave Alliance research from the past few months, it has been ultra clear that we should expect to see very strong secular sales growth in optical networking to the home. Our Alliance research has also shown strong findings in solar energy, WiMAX, and LED white-light growth. What we love about EMCORE (EMKR NASDAQ) is that it has significant intellectual property, patents and products in all four of these areas.

"In fiber optics, EMCORE provides key components for delivering video, voice, and data over copper, hybrid fiber/coax, fiber, satellite and wireless networks. Its solutions include optical components and subsystems for fiber-to-the-premise, cable TV, and high-speed data and telecommunications networks. EMCORE transformed the cable industry back in 1987 with the first linear fiber-optic solution for transmitting video signals over fiber-optic cable, and they continue to have a role in the industry's success today.

"Its photovoltaics segment provides solar cells, solar panels and other key components to the high-end solar energy world. EMCORE currently has a subcontract with the Defense Research Projects Agency (DARPA) Very High Efficiency Solar Cell (VHSEC) program to more than double the efficiency of terrestrial solar cells within the next four years. The University of Delaware, the prime contractor for the program, selected EMCORE's photovoltaic division to develop advanced solar cells for Phase I of the program.

"Through its 49% joint venture with General Electric, EMCORE plays a vital role in providing next-generation, high-brightness LED products and solutions. We are doing well with Cree in the white-light LED world, and EMCORE gives us another chip in this transformation. The venture combined EMCORE's semiconductor experience with GE Lighting's name recognition, marketing and distribution capabilities.

"The company also produces key components for WiMAX and Wi-Fi Internet access, along with 3G mobile handsets and PDA devices. Overall, EMCORE is so well positioned in four of our favorite ChangeWaves that we believe its sales and profit picture is set to explode. And on top of all the sales growth coming from their new products in optical components, WiMAX, solar and FTTP, LED sales should start kicking in during 2008 in a big way. The stock looks like the best- positioned multi-Wave company I have ever seen."

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