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August 3, 2005...Jo Ann McDonald's "Lucky 13" Nasdaq exchange (USA) compound semi (CS) and solid state lighting (SSL) industry stock picks are doing well, overall, gradually climbing back up out of the downturn hole. Cree Inc. (trading symbol: CREE) and Spire Corp. (trading symbol: SPIR) are doing especially well, 11 moved into the next highest single digit, and only 4 of the 13 slid down a bit. By expanding their CATV product offerings Emcore Corp. (trading symbol: EMKR) experienced a good drive upwards on news of a 57% increase in revenue from a year ago and thinks it can bring in $34-35 million more in revenue next quarter. Thus, hope springs eternal... even in the telecom sector.

If you recall, I announced my official entry into the CS stock investment field (and resulting loss of journalistic innocence) in previous columns. (Ref: May 6, June 1 and July 5.) The rationale for finally entering the investment game was fully explained in those columns, so I'll not repeat my overall motivations only to say that, after tracking the field for 30 years now, it's a novel personal thrill to view our compound semi (CS) and solid state lighting (SSL) industries from the investor's perspective. The portfolio is now officially in place and 100 shares of each of 13 companies have indeed been purchased in my name, following the appropriate pre-announcements of my intent to do so. What I will do from now on is provide our readers of CompoundSemi News and LIGHTimes with monthly updates and my personal analysis of how the portfolio is performing. Caution: Those who know my writing style as an advanced technology columnist know that said reports aren't likely to be what you see from mainstream financial analysis sources.

The Lucky 13 include (listed in the order I elected to buy them, with the original price paid in the June-August timeframe, followed by the price as of August 3, 2005): Emcore (EMKR: bought at $3.63) has risen to $4.54, Cree (CREE: bought at $24.27) has risen to a very impressive $29.16, TriQuint (TQNT: bought at $3.37) moved up to $3.80, Color Kinetic (CLRK: bought at $11.27) moved up to $12.24, Andigics (ANAD: bought at $1.51) climbed to $2.57, JDS Uniphase (JDSU: bought at $1.60) dropped a bit to $1.52, Spire (SPIR: bought at $4.50) jumped rather dramatically to $9.87, RF Micro Devices (RFMD: bought at $5.25) has risen to $6.36, Kopin (KOPN: bought at $4.43) has risen to $5.40, WJ Communications (WJCI: bought at $2.06) slid to $1.39, Vitesse (VTSS: bought at $2.52) slid a bit to $2.23, Aixtron (AIXG: bought at $3.64 just the other day) rose a smidge already to $3.71 and AXT (AXTI: bought the same time at $1.25) slid a bit to $1.19 today.

So there's my "Lucky 13," which I hope to keep a long, long time. Doing the basic math and rounding off just a bit, for the initial $7,000 investment in the entire CS stock portfolio, after just a couple of months it's now worth $8,400. Like I said originally when kicking off this project, with only 100 shares in each of the 13 companies, this is far from high stakes investing so there's not much real money at risk. While I'm not likely to get rich off an upturn... you never know in our business. While it remains a disappointingly unsettled world, the global marketplace is clearly growing rapidly and all of these companies are global players. In fact, the Lucky 13 were among the first to simply shake their heads at these outdated nationalistic notions and have stature and involvement in many different countries. The fact that the vast majority of the 13 rose at least a dollar each in value over the last month says to me there is indeed a basic upturn trend in our CS and SSL industries. The fact that Spire and Cree made significant strides is downright exciting!

My investment in Spire just about doubled in one month from a purchase price of $4.50 to today's quoted price of $9.87. Of course, when you're dealing in single digits, as is the case with the vast majority of the portfolio, it doesn't take much to mark a major percentage leap or decline. But Spire's leap forward is impressive by anyone's math. The Cree stock was purchased at $24.27 which, at the time, represented the most expensive stock price of the batch. Now approaching the envious $30 mark, I'd say Cree is continuing to live up to expectations.

Everyone expects a lot from Cree as they always have. Especially Cree people themselves. It's good to be on the winning team and... like I wrote last year about this time in this space (long before considering the portfolio) "Never Underestimate Cree". I've tracked Cree since its inception, (see litany of online coverage on this site). The company will continue to do well for years to come because it's truly are a modern day Intel. Now that I've actually put my own money into shares of Cree stock (albeit a very small amount, but hey, at 100 shares of each, it makes the math soooo easy), I must admit a bit of a thrill seeing the upward performance and equating that with the fact that I made almost $500 on Cree alone, and $1400 overall, without doing a thing! What a concept!!! I could learn to like this investing thing. I can see why people who are really rich get into the investment game. Add a few more zeros to the left of the decimal point and I imagine the thrill grows exponentially.

But I'm not in this to play. I'm probably the most patient, long term investor they'll ever see. I'm in it for the long haul because these are industries I've been involved in, up close and personal, for over 30 years now. Why not plan a little retirement nest egg around the primary players of a field I know and love. This is also the first time I've had the personal capital to risk. At my financial level, I take gaining or losing $6,000 very seriously. I weighed that against the fact that I truly believe, passionately, in compound semi and solid state lighting solutions. I truly believe what these industries create are much needed in the world and overall, contribute to the betterment of life.

I'm on record as concurring that there would be an overall upward trend for everyone, starting this summer, mainly because there was no way to go but up! Times have indeed been hard and continue to be hard. But I truly believe we're over the hump now. With the exception of Cree and Color Kinetics, CS industry stocks appeared to me to be at an all-time low at the start of the summer. I felt it was already a little late to get in to investing in Cree and CK as they were already pushing my price limit. It's much easier to say yes to a stock costing between $1 and $3 but double digits still make me nervous when I'm on the buying end. Cree and CK, however, were irresistible because they have both become such key leaders in the SSL industry which was doing well despite the depression.

Spire's stock performance didn't surprise me either. I continue to be surprised that it's taken this long to get moving. Contrary to most in the portfolio, Spire isn't wholly in the compounds. While Spire is a pioneering CS industry company, they departed from that business for awhile and became highly diversified in silicon-based solar, a variety of products for biotech, and continues to serve the defense industry. Spire's newly back into the CS foundry field. The stock price undoubtedly shot up due to the announcements of various recent contract wins in its non-CS related businesses. What I invested in was primarily Roger Little, Spire's founder and CEO. Roger's my age, an old friend, who still shames everyone our age (65) by continuing to participate in the grueling Iron Man triathlon physical competition. Roger sensibly brought his son, Mark Little into the company, which gave me even more confidence in Spire (ref: our coverage of Mark's appointment to the Spire board in May of '04). I'm a big believer in family-based business.

So that's how things shape up as of early August, 2005. I'll report on the portfolio progress the first week of each month. I may add to the holdings, in breadth and depth, out of the profits but I seriously doubt I'll sell any of the shares for a long, long time. A couple of years from now when things settle back to normal (whatever that is), I predict the overall CS and SSL industries will be robust again and stock prices for publicly held companies in our space will be back to more normal conditions. Full employment for all our fine technical people, worldwide, remains the goal. I doubt if we'll ever see the super boom times again and triple digits, but hey... you never know. Google (symbol: GOOG) remains my ideally typical role model. Hittite, a design house that uses a variety of merchant CS foundries to fab their chips, went public today on the Nasdaq (symbol: HITT opening their IPO today at $17 per share and closing near $20 netting $76.5 million for the company's coffers in one quick day. That's a pretty good initial hit for HITT. With Hittite going public, I get the feeling others in our space will start feeling brave and begin rethinking IPO thoughts. If so, please... keep me informed.

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