Riding the Change Waves in Energy

05/24/2007 12:00 am EST

Focus:

Tobin Smith

Founder and Chief Research Analyst, NBT Equity Group

Tobin Smith, founder and chairman of ChangeWave Research, told attendees at last week’s Las Vegas Money Show about several ways to play emerging technologies in energy transmission and conservation.

We are talking about a variety of wealth waves here and one of the things that I think is going to be interesting is your grandkids are never going to see a light bulb.

What they are going to know is a white-light LED (light-emitting diode)--not this fluorescent stuff. Australia has come out and banned light bulbs. Europe is going to be banning them, you are going to see that in California, [and] you probably are going to see that in New Jersey.

So who benefits here? The company that we’ve done well with and we are going to do a lot better with is a company called Color Kinetics (NASDAQ: CLRK). Now Color Kinetics owns about 150 different patents in this.

But if you have been to the LA airport recently or you have flown out of LAX, you know you have those orange lights. Well Color Kinetics is replacing those lights with an $18 million deal which is not big in and of itself but they are going to pay off their system [at LAX] for $18 million in 6 ½ months just on the electrical savings. Not to mention the fact the light is much better.

All right, so CLRK owns again about 150 patents they are licensed all through the world. CLRK does not make the LED, but they fabricate it and make it work. And you are going to see more and more of this. They are transitioning to selling white-light LED and this is the future. (Color Kinetics closed at $27.67 Wednesday, not far off its all-time high.)

[Meanwhile], solar energy is now starting to make sense because $50 oil is here to stay. Oil costs about $30 a barrel now to find and pull out of the ground, so solar now is reasonable.

Suntech Power Holdings (NYSE: STP) is the low-cost producer in China. They use scrap silicon (solar cells are made out of silicon). And the one that I’m looking at adding is a company called Ascent Solar Technologies (NASDAQ: ASTI), the next-generation solar which uses no silicon. Now we’ve owned MEMC Electronic Materials (NYSE: WFR) for a long time. We made great money on it. I think it is still worth about $80. It is down here [below 60], so I would still hang on. (Suntech closed around $35 and Ascent closed at about $8 Wednesday—Editor.)

And then the third one we just added is JA Solar Holdings (NASDAQ: JASO), which is a new initial public offering (IPO). (The stock started trading in February—Editor.) JASO is the low-cost manufacturer and they are owned by the fourth largest silicon manufacturer, so they have the best of both [worlds]. Earnings have been growing 150% a year. We have the model growing another 150% next year and about 75% next year. I want to buy it [up to] $26, but our target for it is $40. (It closed below $24 Wednesday—Editor.) 

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