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No. of Recommendations: 0

So the nice folks at TMF have posted an article looking at potential best small caps for 2007. Here's my take on each of their nominees:


Atheros (ATHR): On the fence on this one. CAPS clearly loves it, but they love and recommendation. Seems like a solid company, but I'm less certain on the valuation. MARKET PERFORM?


Walter Industries (WLT): I see growth potential. moderate OVERPERFORM


Dawson Geophysical (DWSN): Like all of Oil, it has a pretty low P/E right now. OVERPERFORM


Form Factor (FORM): I'm not convinced this is going anywhere. MARKET PERFORM (no CAPS rating for me)


Texas Roadhouse (TXRH): The CAPS sheep are somewhat skeptical, having blessed it with only 4 stars. I don't see much to love there. MARKET PERFORM or worse.


Syneron (ELOS): Israel is an automatic red flag for me. I really don't trust them to ever be stable enough to outperform the S&P. That said, it does look pretty cheap. very tentative OVERPERFORM.


Portfolio Recovery Associates (PRAA): I've been long on this for a while. There are going to be a lot more defaulters as Americans continue to overspend and not save. Can't argue with the ratios. STRONG OVERPERFORM


KongZhong (KONG): Wow, what a dumb company name.Seems like one of those "what exactly do they do?" companies, but obviously they make money seeing the low P/E. But you know, it looks like a value pick. Let's say unenthusiastic OVERPERFORM


Tempur-Pedic (TPX): Mmmm that is a juicy P/E. Must be a reason for that, but I won't dwell on it. OVERPERFORM


Encysive Pharmaceuticals (ENCY): Stocks like this are why some people think of investing as gambling. Either the drug is approved, and they get bought out, or don't, and go bankrupt. Europe having approved it is nice though. OVERPERFORM, but too risky for me.


Volcom (VLCM): Hello fad, pleased to meet you. Can you last through 2007? Of course, it's not that expensive right now. Slight UNDERPERFORM


American Science and Engineering (ASEI): Government contracts are nice. OVERPERFORM


Pan American Silver (PAAS): I'm leery of anything that has recently had a big run-up. CAPS isn't in love with it. MARKET PERFORM


Labor Ready (LRW): Looks pretty good from a valuation standpoint. CAPS likes it. Management seems a litlte shady. Tempered OVERPERFORM.


Middleby (MIDD): Has had a fantastic run lately. 2007 should be good for it overall. Still, I expect stagnation for the first half of the year. Modest OVERPERFORM


My Rankings:

Given my blessing (CAPS Overperform calls)



3. WLT


Moderately recommended

5. TPX



8. LRW


10. KONG

Not recommended

11. ATHR

12. PAAS

13. FORM

14. TXRH

15. VLCM


Overall I think it's a pretty decent group of stocks, which isn't shocking since FOOL is usually pretty good. Even Volcom, my least favorite of the bunch, didn't earn a CAPS underperform from me. Still, a lot of them look like mediocre performers with the extra risk of being small cap.

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