September 6, 2005...Jo Ann McDonald, author of "The McDonald Report" and holder of a modest stock portfolio of publicly-traded companies considered typical leaders in the compound semi and solid state lighting industries (about which we report in CS News and LIGHTimes) shares with readers the results of August activities. Overall, there wasn't much action, with modest rises for half the portfolio. Except for Color Kinetics (Nasdaq: CLRK), which rose about $2 per share for the month. Tying for 2nd place rises were Emcore (Nasdaq: EMKR) and Kopin (Nasdaq: KOPN) and Anadigics (Nasdaq: ANAD) and RF Micro Devices (Nasdaq: RFMD) rounded out the rest of "the winners." Read on for details.

Picking up where we left off in the Aug. 3rd McDonald Report, which reminded everyone that I'm definitely not a stock guru... simply a columnist who's hung around in CS tech wells for 30 years now, only recently taking the personal plunge into Stocksville... it turns out my modest little portfolio continued to rise. I knew it would, primarily because there was nowhere to go but up! That's why I began investing my own money in the companies I've championed over the years. In all those years, I'd never seen the prices of entry so enticingly low. As you'll also note from that August report, I purposely bought just 100 shares each of 13 stocks, warning everyone a month early that I was doing so, in the event that something wonderful happened to them simply because I'd declared my favorites. I also warned readers to do their own due diligence and certainly not to rely on mine... although I'm probably closer to the field(s) than many professed "gurus" (link to past 5 years of editorials).

Total buy-in, to date, was just short of $7,000. Total value of those 13 stocks as of August 3rd amounted to just short of $8,400. As of today, September 6th, the portfolio rose slightly by another $176. In addition to not being a stock guru (if I was I'd know all the cool Wall Street buzzwords), I'm also terrible at math, so feel free to re-crunch my numbers. But what I see is an increased value of the portfolio to the tune of $1,576 since the initial buy-in. Not bad for our largely beleaguered field, which is why I've undertaken this experiment. My intent is to hold the stocks long term and see how the portfolio profits in the long run. I figure that if I'm gradually increasing the value of my holdings, the companies are gradually gaining strength.

The 13, by Nasdaq stock ticker symbol (and listed in the order I bought them) are: EMKR, CREE, TQNT, CLRK, ANAD, JDSU, SPIR, RFMD, KOPN, WJCI, VTSS, AIXG, AXTI. And I've decided to add one more. TIR Systems. According to all reports from those I respect, TIR's Lexel core technology for the fledgling SSL industry looks like it will help propel that company in the months and years ahead. They're also good folks up there in Canada. I've known TIR for a long time and they'll do well. TIR trades on the Toronto exchange (TSX) under the simple to remember symbol "TIR." If you use Yahoo Finance to track stocks (my favorite and easiest to use) the symbol to enter is TIR.TO.

My rationale as to why I select a given stock are varied. Mostly, it's because I truly believe these companies will be around awhile, and over the long term, thrive. In most cases, they're compound semi industry pioneers. There are many companies in our field I'd love to own stock in, but they're simply not available for public trading, or I simply don't know the company that well. As some of the special ones go public in an IPO, you can bet I'll be first in line to buy in... and I'll always let you in on my intentions prior to investing.

Of the 13 currently in the portfolio, Color Kinetics' (CK) stock performed especially well during August, jumping from $12.24 per share to today's close at $14.89. The jump apparently came after CK won the summary judgment in the dispute caused by Super Vision (ref: Aug. 22 news). What I disapproved of since the onset of the case last December was the fact that SV and their allies tried to "try the case" in the press. We didn't bite. Obviously, other investors (and probably the judge as well) didn't like that tactic either, but investors did seem to like the outcome as CK's stock and volume trade rose dramatically after the judgment announcement. CK's stock still hasn't regained their high of almost $20/share, but hey, I bought at the dip and got in at $11.27. Can I call them, or what!

To recap the summer, here's how the entire portfolio did: Emcore (EMKR: bought at $3.63) rose rather impressively by Aug 3rd to $4.54, and continued its charge and is now $5.24...Cree (CREE: bought at $24.27) rose to an impressive $29.16, but fell in August a bit and is now 25.65...TriQuint (TQNT: bought at $3.37) moved up a bit to $3.80 by August and is now $3.86. As stated above, Color Kinetic (CLRK: bought at $11.27) moved up to $12.24 by August and is now $14.89... Anadigics (ANAD: bought at $1.51) climbed out of the dollar hole by August to $2.57 and inched up a bit more and is now $2.75... JDS Uniphase (JDSU: bought at $1.60) dropped a bit to $1.52 by August but is moving forward and starting again to acquire key smaller companies, and is now $1.55... Spire (SPIR: bought at $4.50) jumped dramatically over the summer to $9.87 and is holding its own and is now $9.50. RF Micro Devices (RFMD: bought at $5.25) had risen to $6.36 by August 3rd and is continuing a slow climb up due to Nokia and Mot's cellphone successes, whom they supply, and is now $6.42. Kopin (KOPN: bought at $4.43) rose a dollar by August 3rd to $5.40 and repeated its performance and is now priced at now $6.60... WJ Communications (WJCI: bought at $2.06) slid to $1.39 and can't seem to get any momentum (I truly thought they'd score enough military contracts by now to do so) and is now $1.26. Vitesse (VTSS: bought at $2.52) slid a bit by early August to $2.23 and is now $2.25... Aixtron (AIXG: bought at $3.64) first rose a smidge to $3.71 and is now $3.42. And last but not least, AXT (AXTI: bought the same time at $1.25) which is trying valiantly to get its act back together first slid a bit to $1.19 and is unching up slowly and is now $1.35.

On the telecom side of the compound semi street, JDS Uniphase's status seems to sum up what's happening with far too many North American-based companies. They're continuing to "consolidate" and moving manufacturing out of North America. (Ref: Sept. 5 news written by our news editor, Scott McMahan). "The new CEO, Kevin Kennedy said, 'Clearly we are trying to continue to minimize the amount of North American Manufacturing and in North American have only those things that make sense. 'He added that the company will continue to move manufacturing out of North America to Asia and that, 'We probably have one more year of significant manufacturing footprint consolidation. 'The company plans to reduce its headcount by 550 in its continued consolidation and restructuring in the coming fiscal year. In addition the company will stop manufacturing products at its Santa Rosa, California facility. This will further reduce the head count by about 130 workers. Kennedy mentioned that the company may look to Thailand and Singapore as places for manufacturing." The telecom side of the compounds isn't out of the hole yet, but it's obviously starting to recover.

On the solid state lighting side, Color Kinetic's energy and endurance continues to astound people, and essentially represents the SSL industry as a whole. That's why I'm excited about investing in TIR, which is in a similar space in the supply chain as CK. The frantic growth spurt seems to be leveling off and the installed base for advanced LEDs is growing quite more rationally. There's much work ahead for everyone (especially on industry-wide issues like standards and nomenclature), but things seem to be on track. As we reported August 17th, Strategies Unlimited estimates that "for the next five years, growth rates may be expected to be in the range of 10-15% per year, rather than the 40-50% that the industry has come to expect." So said SU's Bob Steele who added, "However, even with these lower growth rates, the HB LED market is still expected to reach $6.8 billion in 2009, nearly twice the level of 2004."

Behind the numbers, just look at the core technologies coming out of leading publicly traded companies like CK and TIR. Then look at what the up and coming systems integrators that aren't publicly traded are doing, like OptoLum and Permlight. Look hard at what "The Big 5" (with Epistar's growth... "The Big 6") are shipping, and to whom... and in what amounts, and how all are striving to meet increasingly challenging specs. My bet is that my investments in SSL industry stocks and the CS foodchain that supplies them will be looking pretty bright 5 years from now. You might want to consider getting in on the action.