5 More Top Stocks

Next year will be the year of the large cap.

That's a theme I've seen popping up in a number of financial publications recently. And maybe they're right. But who cares about next year? What I want to know is which stocks are going to be the best to hold for the next few decades. That answer, I think, will continue to be small caps. Because ...

1. Underfollowed small-cap stocks offer incredible rewards.

2. Wall Street is covering fewer stocks than ever before, making now a great time to start looking for mispriced small caps.

So it's more important than ever to refocus our efforts on finding the best small companies.

Our methodology
Unlike Motley Fool Hidden Gems, where our team of just six analysts uses bottom-up, fundamental analysis to ferret out small-cap recommendations, this column uses our Motley Fool CAPS community-intelligence database, where the ideas of thousands of people help uncover promising stocks. The system, which is still in beta testing, asks investors to rate stocks either "outperform" or "underperform." In turn, each investor is rated, as is each stock.

The end result? While only huge companies tend to have more than 20 or so analysts following them, CAPS harnesses the ideas of thousands to provide the "long tail" of the stock market with the same depth of coverage.

Drumroll, please ...
So without further ado, here are five five-star CAPS stocks that few to no professional analysts are covering.

Company

Mkt. Cap*

CAPS Users

Anal.

Anal. Cons.

AnikaTherapeutics (Nasdaq: ANIK  )

$140

42

2

Buy

Great Northern Iron Ore Properties (NYSE: GNI  )

$174

15

0

N/A

Northwest Pipe (Nasdaq: NWPX  )

$225

23

4

Buy

SeaBrightInsurance (Nasdaq: SEAB  )

$355

24

4

Buy

Universal Stainless and Alloy Products (Nasdaq: USAP  )

$230

25

1

Buy

Analyst data from Thomson One. CAPS data current as of Dec. 15, 2006.
*In millions.


As always, these stocks are offered not as formal recommendations, but rather as ideas worth researching further. That said, if you're interested, Northwest Pipe seems like an interesting little opportunity. The company, currently trading for just 13 times earnings, manufactures the steel pipes used to transmit water in the United States and Canada. Lest you think this sounds boring, know that the American Society of Civil Engineers recently gave the U.S. water infrastructure a "D minus" rating. In other words, expect huge investment in this industry going forward.

Of course, Northwest Pipe has larger competitors such as Mueller Water Products (NYSE: MWA  ) and AmeronInternational (NYSE: AMN  ) , and many small caps fail to deliver huge returns. However, if you'd like to learn more about Northwest or any other undercovered small caps, start by reading through what other investors have to say about them in CAPS. Just click here to join the free beta test today.

Tim Hanson does not own shares of any company mentioned. The Fool's disclosure policy pities the fool who doesn't have a disclosure policy of his own.


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