General Electric's (NYSE:GE) Appliances and Lighting division produced $8.8 billion in sales for GE last year. The company tried to sell the appliances half of that division to Electrolux, failed, then lit upon Haier as an alternative buyer. But GE kept tight hold of its lighting division.

And now it's doubling down.

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Image source: Amazon.com.

Present at the inception
Why is GE holding on to its lighting division, even as it parts with appliances? It could be as simple as this: GE is light bulbs.

The company that Thomas Edison founded is so well known for light bulbs, in fact, that its famous '80s tag line "We bring good things to life" is often misquoted as "We bring good things to light." Yet GE has evolved over the years from a maker of incandescent bulbs (which are on their way out) into the top-rated seller of compact fluorescent light (CFL) bulbs on Amazon.com, and into a specialist in LED lighting today.

As reported on Bloomberg earlier this week, GE has just announced plans to discontinue production of CFLs entirely, and focus on LEDs instead. The switchover is slated to be complete by the end of this year. Although much more efficient than the incandescents they replace, CFLs are not always popular with consumers. They cost more up front than incandescents, and are less efficient than LEDs -- resulting in less cost savings over time.

Now, caught between the proverbial rock and a hard place, CFLs may be going the way of the dodo. According to Bloomberg stats, nationwide CFLs control only a 15% share of the lighting market, and that's declining. LEDs have 15% as well, but that share is growing, and GE predicts that by 2020, LEDs will represent 50% of all light bulbs used in the U.S.

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CFLs have similar market share to LEDs, cost five-times less, and sell well on Amazon. Yet consumers still don't love them. Image source: Amazon.com.

Perhaps most important, because LEDs are essentially microchips writ large, they offer versatility that appeals to GE as a means of widening its "smart home" market share -- by linking lighting to smartphones via Bluetooth, for example, or even using light bulbs to extend Wi-Fi ranges within the home. And the fact that LEDs can sell for as much as five times the price of CFLs? That's just gravy.

Hold up a sec. What was that about LEDs and microchips?
LEDs -- light-emitting diodes -- are basically just semiconductors that emit light when activated by electricity. That means that for investors interested in riding General Electric's coattails into this industry, there are a whole lot more investing opportunities than just buying GE stock itself.

Here are three of them.

Veeco Instruments
With a market cap of only $760 million, small-cap Veeco Instruments (NASDAQ:VECO) offers arguably the greatest potential to grow alongside growing consumer interest in LEDs. Veeco makes the equipment that makes LEDs. It's not profitable at present, but generated $54 million in free cash flow last year, according to data from S&P Capital IQ. Weighed against the company's small market capitalization and large cash hoard ($400 million, and almost no debt), that works out to an ultra-cheap enterprise value-to-free cash flow ratio of just 7.5.

On the minus side: Veeco earned no profit in 2014, or in 2015, either, and is expected to lose money in 2016 as well before returning to profitability. For a price this cheap, "You pays your money and you takes your chances."

Cree
Investors seeking clearer growth prospects might prefer to look at the granddaddy of LED investments, Durham, North Carolina-based Cree (NASDAQ:CREE). Cree sports a $2.8 billion market cap, and more than $400 million (net of debt) in the bank.

Like Veeco, Cree is currently unprofitable from a GAAP standpoint. But also like Veeco, Cree generates copious piles of cash from its business. In fact, the past 12 months saw Cree generate $102 million in real cash profits. That works out to an enterprise value-to-free cash flow ratio of just 23.5 on the stock. If Capital IQ estimates of Cree growing its profits 38% annually over the next five years are anywhere close to correct -- Cree could be a bargain.

Applied Materials
Like the idea of investing upstream in LEDs, but don't like the idea of buying stocks that don't earn GAAP profits? Applied Materials (NASDAQ:AMAT) is an LED equipment-maker like Veeco. But unlike Veeco, Applied Materials made $1.4 billion in profits last year. Granted, only 69% of that ($948 million) was backed up by real free cash flow, so the stock's EV/FCF ratio isn't as pretty as its P/E. But with a price-to-earnings ratio of only 15.3, and a growth rate of 15.3%, Applied Materials looks pretty cheap anyway.

Bonus points: Applied Materials pays a 2.3% dividend.

And there you have it folks. Three stocks that, like GE, hope to ride the wave of consumer adoption of LEDs over CFLs. None of them have the size, scale, or name recognition of General Electric, but for investors hoping to sneak in on the ground floor of the LED phenomenon, that might work to your benefit.

At these low prices, it certainly can't hurt to look. You just might bring a great bargain to light.

Er, life.

Rich Smith does not own shares of, nor is he short, any company named above. You can find him on Motley Fool CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 251 out of more than 75,000 rated members.

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