I have been doing some more research on the LED (Light Emitting Diode) market and I have concluded that it could easily be a $20B+ market, which would represent enormous growth from here. It's an exciting market.

As described here in my post on EBN Online, the math is pretty simple. Right now, LEDs are estimated to have less than 5% penetration of the global lighting market, which is estimated to be near $80B. In Japan, LED penetration is already approaching 50%. If you assume that LEDs can get to 30%-40% penetration of the global lighting market in the next 10 years, you are talking about a $20B+ market.

The most common LED play is Cree (Nasdaq: CREE), a market leader with a strong patent position. Another good public-market play is VECO, which makes a variety of LED technologies as well as manufacturing and testing platforms.

(Disclosure: I have been in and out of CREE and VECO over. Currently long VECO, and looking for a better long-term entry point in CREE.)

Just because an economy is crummy, or just sub-par, does not mean you cannot make money. Plenty of companies have proven that innovation can create value even in a down economy.

This was a fascinating topic to me in the earlier part of the last recession as I watched Google and Whole Foods Markets climb steadily during the recession of 2000-2002. If you think about it, these were very strong companies that created lots of value, jobs, and profits during a period in which the economy was stagnant or shrinking.

What about now? Regardless of the worst economy in 80 years, there are still opportunities.

To give you some examples, where are some more ways companies create value in a down economy:

• Providing a technology that performs a task more efficiently, better, and cheaper. This is a basic goal of technology innovation: Give your customer 5X the power at the same price, then they buy a product. Some examples I see of companies doing this include Riverbed (RVBD), in enterprise networking, CREE in LED lighting, and Western Digital (WDC) in digital storage. All three of these companies have grown during the "Great Recession."
• Scientific discovery in healthcare. A scientific discovery can create value no matter what the macro economy is doing. Many biotech companies are still booming and creating value, regardless of what the economy does. This is because they can make discoveries that create new markets out of thin air. Some quick examples: Qiagen (QGEN) develops new test for human papillomavirus -- its stock us up 50% in five years. Illumina (ILMN) has outstepped the competition in sequencing genes. In five years, its stock is up 500%, compared with the S&P being down in the single digits.
• Providing a high quality product and brand. Markets are constantly choked by competition, but if you can consistently provide high-quality product that gets consumers excited, you will take market share and grow your brand. Some great examples of this are Apple (AAPL), Green Mountain Coffee Roasters (GMCR), True Religion Apparel (TRLG), and the Intercontinental Exchange (ICE). All of these companies have grown in the last five years. In fact, Green Mountain tripled revenue in the years 2007-2009, and ICE doubled reveune from 2007-2009.

Cree (CREE) earnings were out after the market close, confirming that the LED (light emitting diode) market is white hot. The stock is up nearly 10% after hours. The semiconductor and LED company's  second-quarter profit tripled. It cited surging demand for LEDs as one of the drivers of its earnings.The companyprojected fiscal third-quarter earnings of 41 cents to 44 cents, excluding items, on revenue of $215 million to $225 million. Analysts surveyed by Thomson Reuters projected 28 cents and $190 million, respectively, according to the Wall Street Journal. The stock was trading up $5.54 to  $59.75, up 10%,  in after-hours trading. That's above the recent 52-week high, which it made last week. The advantage of LEDs, which are more akin to chips than light bulbs, is that they last much longer and consume less energy than traditional light bulbs. In November, the company said Wal-Mart Stores Inc. (WMT) would use LED lighting in 650 stores. I have just been delving into LEDs lately, but I think the demand for this technology will be huge over the next 5-10 years. Walmart is just a sign of things to come. Investors I spoke to in this market point out that commercial applications of the technology are only the beginning, as LEDs are making their way into the consumer market in the form of flashlights and house lightbulbs, which is huge. Imagine every light bulb on earth being replaced with LEDs. Cree benefits in several ways in the market. Not only is Cree a manufacturer of LED technology, but it holds key patents on the technology. The patents in LEDs are closely watched in the industry because they are held by a key group of companies and controlled by cross-licensing agreements. Read this article in LEDs magazine to learn more. This cool chart from LEDs magazine demonstrates the complexity of the LED patent world: (Disclosure: No position in Cree. Unfortunately)