Does Barack Obama Care if You Know This Company’s Name?

by Travis Johnson, Stock Gumshoe | September 30, 2013 2:01 pm

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Scoping out the Oxford Club's Latest Lighting Teaser

Um, no.

That’s just stupid.

But it is the subject line of the latest teaser pitch from the Oxford Club for their membership and their Communique newsletter — the subject reads, “The One Stock Obama Doesn’t Want You to Know About.”

Why? Well, it’s not even really implied in the ad message that follows — which is about the banning of incandescent light bulbs as a national energy-saving plan.

But they’re teasing a company that they say has the manufacturing chops to manufacture the new, more efficient light bulbs that will be needed more inexpensively. Is that what’s supposed to make President Obama want you to be “in the dark” about the name of the company? I don’t get it.

OK, fine, I do get it: The folks at the Oxford Club are no dummies, and if you say something inflammatory about President Obama in your subject line it means there’s a better chance that your email will be opened — particularly by the grouchy, older, relatively well-off white men who tend to be Republican, and who are the core readership for all investment newsletters.

It’s not just Obama, of course — they did the same thing with George Bush before him, and Bill Clinton before that. Apparently polarizing political figures make people want to open their email.

Does the President want the maker of efficient light bulbs to be secret? Don’t be stupid. If he thinks about them at all (I’m guessing he’s a bit too busy, frankly), he’s wanting the free market to do what the free market does: Allow room for innovation within a regulatory framework, and use regulations to spur demand for more energy efficient products (like tax breaks for Energy Star appliances, or auto fuel efficiency standards), which tends to help increase efficiency and lower prices as volumes climb.

But that’s beside the point — I just can’t resist a little blather. And yes, I know, you have strong feelings about Obama, or Bush, or light bulbs. If you insist on sharing those feelings, you can do so in the comment box below. Those feelings are irrelevant to the current teaser that I will get to starting … now:

“You may have heard that the government is banning the 100-watt light bulb… And very soon the 75-, 60- and 40-watt bulbs as well.

“Now, some people think that a light bulb is trivial, but we believe Americans can decide how to light our homes just fine on our own.

“And now the government is trying to take away our choices.

“But one small company is saving Americans from the dreaded ‘light bulb law’

“While competitors are lobbying to force Americans to buy their bulbs, this company has instead created a better bulb that consumers will want anyway.

“It’s competing its way to bigger profits, instead of lobbying for them.”

So who is this light bulb innovator? Apparently they’ve developed a product that is …

“… 78% more efficient than an ordinary bulb and lasts 25 times longer… Saving the average homeowner about $6,975.”

And it’s making the bulbs cheaper, we’re told:

“this company is changing the game…

“It’s developed a way to mass-produce the product and sell it much cheaper than anything on the market.

“Yet most American’s have never heard of the company… It’s a small manufacturer that’s seemingly coming out of nowhere.

“Though this company is less than 3% of the size of General Electric, its sales are growing seven times faster.”

Not a lot of clues, right? I can guess at the name just from the gist of the ad … but since they also include a chart showing how spectacularly this stock has done already, we can use that as a clue as well — here’s a clip of the chart:


Which means, sez the Thinkolator, this “secret” stock is … Cree (CREE).

Which, if you’ll notice that recent dip in the chart, scared the heck out of its investors on August 13 — not because the earnings were bad, they weren’t, but because it’s a pricey stock that’s been driven by the hot story of LED lighting, and the CEO gave what most are interpreting as lowball guidance.

And … well, that’s about all I know about CREE — this is the kind of company that often does well, with a huge market opportunity as lighting becomes more efficient and their LED bulbs achieve greater economics of scale and get more cost-competitive with fluorescent or halogen bulbs even before energy savings, but I don’t know much about the specifics of the market right now, the speed of the changeover, or the business itself.

They are trading at about 25X next year’s expected earnings, and analysts think their earnings will climb by 15-20% this year and next, so that’s reasonable — I guess the reason to buy this one is if you think the analysts are underestimating the growth potential and believe that their earnings growth will stay on the same torrid pace of the last year, if that’s how it works out then CREE is cheap. If the earnings growth slows down as is expected, it’s probably a little expensive.

I clearly don’t know enough about this one to buy or sell it, so I’ll toss it out to the great Gumshoe Faithful — what do you think? Did we get a buying opportunity when the stock fell 20% in August, or is it still too expensive? Let us know with a comment below.

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