Changewave Investing, with its well-known editor Toby Smith, is recommending Cree (NASDAQ: CREE) as a play on "the secular shift to solid-state lighting" which he considers an emerging "green" trend.

He explains, "This sector -- a promising play on clean energy -- is growing by leaps and bounds, and we don't want to hold off any longer on buying LED solid-state lighting component manufacturer Cree."

Toby Smithe notes that the transformation from commodity LEDs for cell phones to broader market opportunities has gone slower than expected for the company. However, he adds, "With a key new acquisition and mandates around the world for the elimination of incandescent bulbs, I believe the time is right to buy shares."

He notes, "Our thesis about the transformation of lighting from 90% inefficient incandescent bulbs to 80% efficient solid-state is playing out exactly as we forecast -- and there is no turning back."

Once consumers see the difference in durability (50,000 hours versus 1,000) and the quality of light for LEDs vs. compact fluorescent bulbs (night and day, he states that he expect light bulbs to "go the way of the dodo bird."

An innovator in LED (light emitting diode) lighting and display, Color Kinetics (Nasdaq: CLRK) may, after 10 years in business, begin to gain some momentum if recent earnings are any indication. 1Q 2007 revenue increased 28% to $18.8 million, so this is a small company. The big news, however, is that GAAP net income increased 697%, not a typo, to $1.5 million or diluted EPS of $0.07, up from 1Q 2006 net income of $188,000 or $0.01 diluted EPS. Non-GAAP net income was $2.3 million, from which $814,000 went to stock-based compensation.

Gross margins improved to 55%. More importantly, Color Kinetics signed 12 new licensing agreements, several of them huge customers such as Ford Motor Company. As a result of landing new big clients, licensing revenue was up 88%. Color Kinetics is living up to its reputation as a lighting innovator, receiving 7 patents in 1Q 2007 alone. This stock may catch some momentum, as the company is flexible and innovative enough to respond quickly to market demand, has a demonstrated record of technical expertise in its field, and can offer clients a necessary product, lighting, that is much more energy efficient, longer lasting, lower maintenance than most current products.

2Q 2007 revenues are forecast in the range of $20-$21 million, with GAAP net income between $0.05-$0.07 per share.The stock closed recently at $27.48, down $0.19.