Cree: A High-Potential Investment

Featuring Lutts’ Logic:

The Big Questions

A High-Potential Investment

Life is full of questions.

The biggest ones include these:

“Why are we here?”

“Given that we’re here, what is the best way to live?”

I found satisfactory personal answers to those two questions years ago.  Most likely, you’ve found yours as well.

Nowadays, I spend more time trying to answer this question:

“How does the world work … and how could it work better?”

Under the umbrella of this question are these.  

“If it’s always men trying to blow up planes, why do we screen women and children?”

“Why do otherwise intelligent people smoke?”

“Why do so many people refuse to wear seat belts?”

“Why are politicians so heavily influenced by lobbyists?”

“Why do we care so much about what Tiger Woods does?”

“Why do so many people watch so much mind-numbing TV?”

“Why are two-thirds of Americans overweight and how do we reverse the trend?”

“When will our leaders start acting on issues of health instead of issues of insurance?”

“When will our leaders take seriously the looming threat of our $12 trillion national debt?”

“Why do schools teach calculus instead of real-life skills like how to balance a checkbook?”

“When will the Democratic party recognize that the teachers’ union, the National Education Association, is a major reason for our substandard education system?”

“When will the Republican party recognize that kowtowing to religious forces moves the party backward, not forward?”

“When will the current two-party system fall apart and enable the entry of a group that focuses on reducing our debt and encouraging personal responsibility?”

“Will the dominant global language in 100 years be English or Mandarin?”

“Will Iran get the bomb?”

“Will Africa ever be able to feed its people?”

“Will the U.S. ever merge with Canada?  With Mexico?”

“How high will sea levels really be in 10 years, 50, 100?”

“When will marijuana be legalized, regulated and taxed?”

“Do aggressive health care practices subvert the process of natural selection?”

“When will we be able to talk rationally about physician-assisted suicide?”

“Will the chief measure of our country’s health ever be something other than Gross Domestic Product?”

If you’ve got any answers, I’ll be happy to read them … and maybe reprint the best.

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Investing in the Car of the Future

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The start of a new year means a lot of investors are ready to jump into something new, something with great profit potential.  For me, this means younger, smaller companies that are not just faster-growing but also relatively unknown; as they become better-known, they attract more buyers, and the combination of improving fundamentals and improving perceptions makes for a one-two punch that can send a stock soaring.

One of my favorites for this year is Cree Inc. (CREE), which is in the business of making light-emitting diodes (LEDs).

Cree has great numbers now; in the latest quarter, its revenues hit $169 million, up 20% from the year before, and it earned 30 cents per share, up 100% from the year before.  Even better, analysts are projecting that the company will earn $1.17 in 2010.

Looking beyond that, I’m very excited about the fact that beginning in 2012, a federal government law will mandate that incandescent light bulbs be replaced by more efficient devices, typically compact fluorescents (CFLs) or LEDs.  There’s no question this law will spell big growth for Cree; the only question is how big.

I recommended Cree here on November 4 when its stock was trading at 43.  

I recommended it on December 7, when it was trading at 51.

And I’m recommending it again today, as it trades at 57.

And as usual with growth stocks, I have no upside target; the sky’s the limit.

A look at the long-term chart tells me there’s resistance at 101, which is where the stock topped out at the end of the 1999 bull market in technology stocks.  But that’s so far back it’s not likely to have much effect today; most of the people who owned the stock then have likely sold, taken their losses, and moved on.

You, of course, if you buy it here, should expect profits.  If they come, let them grow.  And when the trend stops, sell.  That’s the golden rule of growth investing.

Good luck!

Yours in pursuit of wisdom and wealth,

Timothy Lutts
Cabot Wealth Advisory

Editor’s Note: Cree, Inc. (CREE) was recently featured in Cabot Market Letter, our flagship publication. If you want to get the top growth stock picks in the market, like CREE, you should check out Cabot Market Letter. The Letter is top-ranked for both one-year and long-term market timing because it follows a finely tuned system that has been perfected during the last 39 years. Click the link below to find out more.


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