Revolution in Lighting Underway
Dec 9, 2014
Resource sector investors have been battered and bruised in the past three years as they watched the masses investing in the DOW and the S&P do well for no apparent reason. With the general stock market looking very toppy in the major averages it begins to look as if the choices for our investment dollars are few.
It’s never true. There is always opportunity somewhere. I went to a conference in Los Angeles in early December that brought it home to me. I had talked to the head of ForceField Energy (FNRG-Nasdaq) on the phone a couple of weeks back. The company sells and installs light bulbs. How boring. I met with him in LA and he briefed me.
Boring is good. A revolution is going on that will
change our energy consumption in a major way. Some people are going to make a lot of money if they act now.
We all grew up with incandescent bulbs that were outlawed in the last couple of years by many countries including the US. Incandescent bulbs were inefficient and had short lifetimes. An incandescent bulb lasts 1000 hours in comparison to compact fluorescents that last as long as 10,000 hours but are more expensive. Due to their use of mercury, fluorescent bulbs are actually less environmentally friendly. An incandescent bulb converts only 5% of the energy input to light compared to 60% for a compact fluorescent.
I was actually shocked to learn that a nominal 60 watt incandescent bulb actually requires 168 watts to use because not only does it consume 60 watts to provide light, the heat it creates requires almost twice the power requirement just to cool the surrounding area. While we are still getting used to the idea of saving money with fluorescent bulbs, another revolution is underway that makes fluorescent bulbs old fashioned.
The LED light or Light-Emitting Diode bulb turns 95% of the energy input into light so saves 50-80% of power in comparison to any other type bulb. Since the energy goes into light instead of heat they save even more money on cooling. LED bulbs last an incredible 30,000 hours. A $2 billion market for LED is estimated to grow into a $25 billion market in ten years. The market is growing by 25% yearly. According to the US DOE, there will be $1 trillion in bulb sales replacing the 2.5 billion bulbs in the US today. It’s a big market.
Management from ForceField saw the opportunity in the LED lighting field two years ago and have transitioned the company from a group selling LED lights to becoming a provider of all sorts of lighting solutions. After trying to gain entry into LED sales, they modified their approach to that of simply buying lighting contractors already in the space.
It would be wrong to think of them as strictly a US company. They have contracts to install and monitor lighting from Mexico to Costa Rico. Company headquarters are in New York but the two existing subsidiaries are in Massachusetts and San Diego California.
Light bulbs are now a commodity item. The cost will continue to come down as technology and manufacturing techniques create more efficient bulbs in the same way Moore’s Law brought the cost of computing down at a 50% per year price for decades. The two companies they bought were old school but did have a history and a background. ForceField is training their staffs and coming up with innovative ways of using financing to close sales.
While it’s true LED bulbs are longer lasting and use far less electricity to use and cool, they also cost more and require installation. ForceField will install and monitor for a piece of the savings. That makes sales an easy job.
This is an area where penetration and reputation are critical. One of the things I like best about the company is that anyone can do what they are doing. They have no competitive advantage or franchise. They have to thrive on how much better they are than the dozens of companies entering the space.
Company President Richard St-Julien is a true entrepreneur and is coming up with inventive ways for customers to finance the transition to more efficient LED lighting. He knows he has to stay on his toes just to survive because not only are the bulbs a commodity item, anyone can sell them. He sells solutions instead and that will always succeed. The company has a $115 million dollar market cap today. St-Julien will continue to buy other lighting distribution and sales companies. The company will continue to be profitable and it will get a lot bigger. At some point they will become the flavor of the day and when they do the price will go a lot higher.
I don’t like their website. It is loaded with information and fails to communicate any of their real story. Over time they will begin to get their story out and when they do anyone picking up shares today will be happy.
I don’t own shares. Do your own due diligence.
ForceField Energy Inc.
FNRG $6.39 (Dec 08, 2014)
Nasdaq 18.1 million shares