It's been said that some of the best stock investment ideas/decisions take place after an investor reads about the company in a typical American newspaper. Had you read about the recent meeting of leaders of the European Union last week, that would have been the case. At the meeting, European leaders agreed to have the EU's executive arm develop a plan to promote the use of energy-saving fluorescent light bulbs and phase out/reduce the use of incandescent bulbs, following the example of Australia, Chile and other countries.
Fluorescent bulbs light by heating gas inside a glass tube, compared to incandescent bulbs that heat a filament for light. Fluorescent bulbs emit about 90% of the light of comparable incandescent bulbs but only use about 27% of the energy of an incandescent bulb -- roughly one-fourth the energy, an enormous energy advantage.
In a world seeking to reduce green house gases, cutting electrical power required for lighting by more than 50% is substantial, especially when one considers the lower amount of coal/natural gas-generated energy required to light these bulbs. "Fluoros" have another advantage: they last longer, in some cases 5 times longer, than incandescent bulbs.
Further, fluorescent bulb use / incandescent bulb phase-out is increasing as the "fluoro" bulb price drops. The once $10 cost for a 90- watt fluoro has dropped in some regions of the U.S. to below $5. Fluoro prices are expected to decline further as mass production increases, economies of scale prevail, and as bulb technology advances even more.
European leaders asked the European Commission to come up with proposals for saving power in office and street lighting by 2008 and in homes by 2009. The leaders set a target of increasing energy efficiency to save 20% of the EU's energy consumption by 2020 (compared to projected use).
Further, any movement, regulatory or grassroots, popular in Europe would create a substantial business opportunity: the 27-nation European Union has 490 million citizens.
What investment ideas then would come out of this? The obvious fluoro stock plays are General Electric Co. (NYSE:GE) and Europe-based Koninklijke Philips Electronics (NYSE: PHG).
General Electric gets the nod in the United States' market. The U.S. will soon abound in capable fluoro light manufacturers, but GE, with its economies of scale, vendor relationships and equally significant -- marketing savvy -- is well-positioned to lead the sector.
Amsterdam-based conglomerate Philips is expected to lead the European market. Philips, the No. 1 light bulb manufacturer in the world, has the continental branding necessary to lead and any mandate from EC officials regarding public/private implementation of fluoro bulbs will simply notch-up PHG's revenue from the business line.
Competition / Risks: The primary risks to GE's and Philips' fluoro business involves the development of an alternate / superior bulb technology. Solid-state light emitting diodes -- LEDs -- could potentially compete with fluoro bulbs, but their cost would have to drop substantially and their lumens per watt would need to increase to begin to dent the fluoro market.
Hence, for now, fluoro is expected to lead the way to more environmentally-friendly / greener lighting systems, and greener balance sheets for GE and Philips.
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Reader Comments (Page 1 of 1)
3-14-2007 @ 3:53PM
Stuart said...
Is the light bulb a big enough part of either of these companies to affect their balance sheets and their stock prices?
3-12-2007 @ 11:10PM
Mark Fogelson said...
Not so quick! Al fluorescent bulbs contain Mercury vapors - a known poisonous substance severely affecting the human and animal nervous system. If the Mercury containing bulbs are widely used and not disposed properly it can lead to dire consequences especially to young children. At present all used fluorescent bulbs are dumped in the garbage. We have no recycling system to efficiently collect and recycle the Mercury containing bulbs. The recycling of these bulbs is not cheap and econically profitable. Think twice before you leap. I am a sustantial stockholder of GE and hate to see the liability lawsuits that can arise.
3-14-2007 @ 12:15PM
Mike Henry said...
Just my opinion, but GE is so diversified, watt(that's a joke folks) would this cause any effect on GE's bottom line? Shows that GE is moving in the right direction for being leaner and greener.
Confidence is high.
3-14-2007 @ 1:06PM
Mike Henry said...
Potentially good news, spoiled by costs of recycling. When any bit of good appears for saving Mother Earth, it winds up to be initially too expensive. I hold very little stock so what's said most likely means nothing.