Based on the aggregated intelligence of 160,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, LED lighting manufacturer Cree (Nasdaq: CREE) has received a distressing two-star ranking.

With that in mind, let's take a closer look at Cree's business, and see what CAPS investors are saying about the stock right now.

Cree facts

Headquarters (Founded)

Durham, N.C. (1987)

Market Cap

$7.8 billion



Trailing-12-Month Revenue

$750.8 million


CEO Charles Swoboda (since 2001)
CFO John Kurtzweil (since 2006)

Return on Equity (Average, Past 3 Years)


Price-to-Earnings (CREE and S&P 500)

66.2 and 17.2

1-Year Return



RF Micro Devices (Nasdaq: RFMD)
Honeywell International (NYSE: HON)

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 11% of the 963 members who have rated Cree believe the stock will underperform the S&P 500 going forward. These bears include pjani06 and All-Star JakilaTheHun, who is ranked in the top 0.1% of our community.

Two months ago, pjanji06 wrote that the Cree bear case all boiled down to price:

[I]f I had $200 billion dollars in my pocket today. I still wouldn't spend $7.5 billion for [Cree]. ... Newsflash to everybody, this new hot stock idea has already become overbloated, look at how much it has already appreciated in the past 5 years, past 3 years, past 1 year. ... I like LEDs and I like Cree's business, but not at all for stock investment purposes.

In an earlier pitch, JakilaTheHun agrees with that line of thinking. Here's an excerpt:

Great company in a great and growing industry, but getting very, very pricey; particularly in a commoditized industry that should have a glut of capacity by 2011. The risk here is that growth in LED lighting increases [Cree's] revenues so much that earnings skyrocket upwards over the next 5 years and drive the price even higher. ... But I'm betting against that. My view is that revenues will grow, but margins will shrink over the next 5 years. ...

I could definitely be wrong and I do believe Cree is a spectacular company in an absolutely vital and growing industry.

What do you think about Cree, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool's disclosure policy always gets a perfect score.