How many politicians does it take to screw up a light bulb?
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I’m excited to present you with one of this week’s greatest stock picks from our new service Consensus Picks! Not only is this a great opportunity, but it has quite an interesting story behind it as well.
It starts with Thomas Edison who jump-started the global lighting industry 133 years ago. His brilliant invention was, of course, the first electric light bulb.
All these years later Edison’s design is still lighting homes around the world. We love the golden glow of Edison’s old incandescent light. But can we afford it?
The trouble is our old fashioned bulbs burn off most of their energy. They create much more heat than light.
With electricity prices rising and energy supplies under stress, Washington made the decision in 2007 to ban old-fashioned light bulbs. Billions of dollars were suddenly at stake in the race to create new, energy-efficient lights.
The company I’m talking about is going to claim a big slice of those billions!
The Gold Rush Begins
The story behind this company (and why it’s a bargain) is a humdinger. It’s an opportunity Washington could only create by accident.
When politicians decreed five years ago that America should start phasing out Edison’s old-style bulbs they imposed a waiting period.
As hoped, US companies invested billions as they rushed to create energy-efficient fluorescent lights. But consumers grumbled that some of the new lights shed a harsh light and flickered during start up.
Some bulbs also looked ugly — especially those squiggly-tipped fluorescent tubes. Even the environmentalists don’t like mini-fluorescents because they’re a source of serious mercury pollution.
A Brilliant Idea
Now let me take you to the cutting-edge of successful lighting technology, an idea that will illuminate the world!
The brightest and most efficient lights in the world are LEDs. We’ve all seen how bright LEDs are in new high-end flashlights. These tiny bulbs also seem to make batteries last forever.
Edison wouldn’t have understood the technology behind this new breed of light. But I think you can appreciate the general idea.
The heart of this tiny light bulb is a wafer-thin slice of semiconductor called a light-emitting diode or LED. These tiny diodes are just like transistors. The only difference is that transistors give off electricity.
Diodes give off tons of light.
Cool Consensus Pick
LEDs are so cool they last for years. They don’t even burn out. They just fade after a few decades.
How cool is that?
One problem. Consumers complained that the first generation of LED lights were very expensive and shed a strange blue light. Billions of dollars are at stake for companies that can create better, warmer-colored and cheaper versions of the LED. That is a very big technical challenge.
Luckily, Silicon Valley gave birth to one little-known company that is up to the job and then some.
Our Consensus Pick is the one company that is on the cutting edge of tackling these problems. You might call it the Intel of lighting.
This exciting company is Electro Scientific Industries (NASDAQ: ESIO). The company calls itself ESI nowadays.
Oops! Washington Creates a Stunning Buying Opportunity
ESI was going great guns last year, making better and cheaper LEDs as the incandescent bulb deadline approached. But a lot of consumers were complaining to their Congressmen and Senators that they didn’t want Washington telling them what kind of light bulb to buy.
While ESI was generating tens of millions in earnings by improving LEDs, voters fretted about losing their energy-gobbling Edison bulbs. Congress suddenly caved in. It temporarily defunded its own light bulb law.
As Congress backed down, many investors worried that ESI wouldn’t meet revenue expectations. Big customers delayed buying ESI’s sophisticated LED-producing machines.
The stock’s sharp decline has created a breathtaking buying opportunity.
Why an opportunity? Because Congress didn’t actually repeal the law. The politicians just delayed things a bit. What’s more, the ban on incandescent lights is a slow and timid measure. Currently it calls only for the elimination of 100 watt bulbs during 2012.
In fact old-fashioned bulb factories are still going out of business. The market for LEDs is set to roar back to life!
I’m saying investors overreacted and made ESI a real bargain at today’s prices.
I believe ESI will light up the stock market as LED demand rebounds. Already you can see share prices rising from the lows they tested last October.
Now’s time for politicians to get out of the way of America’s technology leaders, including companies like ESI.
Action to take:
Buy stock in ESI (NASDAQ: ESIO). Use a 20% trailing stop loss and don’t pay more than $15.35 for this stock. Hold for five years or a 100% gain, whichever comes first!
I wish you the best with this opportunity and don’t forget to write in to tell me about your success. To get more great picks, join the ranks of Consensus Picks right away.
Click here to learn how you can get more great picks like this one every week from Consensus Picks.
Happy Trading!
Manny Backus
CEO, Wealthpire Inc.
