by Hilary Kramer | February 6, 2014 2:34 pm
Earnings season may be winding down, but volatility is heating up.
The stomach churning movement we’ve seen recently makes it a good time to revisit your investment strategy and positioning to handle the current environment. So what’s going on?
Ben Bernanke has left the Fed building, Janet Yellen has taken his place as leader of the central bank, and the taper continues.
In the meantime, China data continues to point toward a slowdown that many have been expecting. It remains to be seen if the U.S. economy can be driven by more than home sales and the consumer, which may be experiencing its own slowdown due to the cold weather or something more. I’m watching this closely to see if any fundamentals are actually changing alongside all this volatility, or if it’s just a side effect.
This kind of environment makes stock picking more important than ever. I strive to find companies that are on the cutting edge of their industries, driving changes that will outlive any correction and are less susceptible to economic concerns. In many cases, technology is the key to lasting, and even global change, and that is where I’ve found many of our profitable opportunities over the years.
Some of my favorite companies are riding a seismic shift in how we’ve used technology across generations, and for generations. A good example here is Cree (CREE), which is benefiting from the gradual demise of something all of us use every day and perhaps without notice: the humble light bulb.
Cree has all the hallmarks of a game-changing company. It provides the technology to replace old incandescent bulbs with new LED offerings. Although it’s not the only player in this market, it is a growing leader, and the industry is expanding fast enough (and is relatively untapped) to spread the wealth around.
Earlier this week, tech research firm Strategies Unlimited said that revenues for LED lighting applications will have a compound annual growth rate of 30% and will be worth $13 billion in 2017. That’s a powerful trend that won’t be derailed by shorter-term volatility.
The latest numbers from Cree show increased momentum, and bested forecasts across both revenues and earnings. Cree’s fundamental story (as well as that of the whole industry) remains intact.
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