Philips to Acquire Color Kinetics: What's An LED Investor To Do?

Four months ago, I discussed Color Kinetics (CLRK), then at a little above 19, as the best way to invest in the LED theme.

This morning, the Dutch company Philips (PHG), in continuing with its acquisition spree after having just purchased Canadian TIR systems, announced a bid of $34 per CLRK share.

Interestingly, this acquisition eliminates two “problems” for PHG: The on-going litigation between TIR and CLRK, and the chance of losing the competitive bid for the Empire State Building.

I don’t expect a higher bid.

Now that my favorite LED-themed investment is gone, what is an investor who likes the theme to do? Since I wrote the article, there has been tremendous interest in names leveraged to LED growth, as the end of the incandescent bulb appears to be near. Some governments have already mandated phasing them out, and our country is contemplating doing so. Daktronics (DAKT) has performed very poorly of late and appears to be nearing support. It benefits from the falling costs of LEDs as they are a key component of their products. Cree (CREE) has done well, though mainly making up some lost ground. I continue to have a negative view on the company’s prospects. Subsequent to writing the article in February, I did uncover a group of companies that should also benefit from the move to LEDs. A better way to describe it would be the move away from the incandescent, as they are positioned for expansion of CFLs as well. In fact, I steered one of my clients who had been interested in CLRK but saw the stock run away from them before they could buy it into one of these names. I will leave it to the clever reader to figure it out on their own for now.

Disclosure: No position in any of the stocks mentioned in this report.

Comments

[vh2478]

One of the best long term plays is a small microcap called Cyberlux (CYBL). They are slowly refinancing their debt from CD holders to Deutsche Bank AG London. Very nice indeed!!! Has multiple patents on Scattered Photon Extraction (SPE) method for LED's and phosphor patents.. These patents will be licensed out to the big 5 LED manufacturers to achieve 225 lumens per watt.. 5 times where the best are at today....Sleeper that is going to go bonkers when the word gets out.