5 Top Micro-Cap Stocks

Hey there, Fools. We're back again to help you identify some of the most attractive micro-cap stocks worthy of your investment dollars. We do this because:

1. Underfollowed micro-cap companies offer great returns -- and sometimes even the best returns.
2. Wall Street is covering fewer stocks than ever before, making now a great time to start looking for tiny treasures.
3. Micro-cap stocks can burn you if you don't do your homework, so we try to shed more light on the asset class for you. 

Microscopic surgery
This column uses our Motley Fool CAPS community intelligence database to turn up promising stocks. The system asks amateur and professional investors alike to rate stocks either "outperform" or "underperform." In turn, each investor is rated based on performance.

The end result is that while only huge companies like AT&T (NYSE:T) have more than 15 or 20 analysts following them, CAPS harnesses the ideas of tens of thousands of investors to get at the long tail of the stock market with the same depth of coverage. 

Drumroll, please ...
So without further ado, here are five CAPS stocks sporting a rating of four or five stars (out of five), that have market caps between $100 million and $300 million, and that four or fewer professional analysts are covering.

Data from Yahoo! Finance and Motley Fool CAPS .

As always, don't view these stocks as hearty formal recommendations, but rather as appetizing starters for further analysis. Agreed?

Now that we have that settled, Boots & Coots and Zhongpin might be a pair of small wonders worthy of your Foolish due diligence.

Little firefighter
Its name may elicit grins, but Houston-based Boots & Coots is one serious business with some notable CAPS support. Of the 130 CAPS All-Stars who've rated the well control and emergency response company, just three are bearish.

Over on Boots & Coots' CAPS page, you'll find bullish sentiment regarding the company's stable and niche-y model (oil well fires will always need to be put out), international exposure (especially in the Middle East), and tiny size leaving plenty of room to rocket. Halliburton (NYSE:HAL), for example, offers a similar play but at more than 200 times the size.

With earnings expected to grow 25% over the next year, Boots & Coots' current price-to-earnings ratio of 12.5 also looks enticing.

Two months ago, CAPS player dbhealylongonly made this call:

I've been watching this stock for a few months now, and lament "missing the boat" when I could have been along for the recent ride up. In any case, I am still very bullish on [Boots & Coots], and the niche market they serve. Regardless of the high price of oil, they provide a service that drillers need in any economic environment.

Hog heaven
Zhongpin, a Chinese meat and food processor, is another stock in the long tail that piques the interest of our community. Just like Boots & Coots, the unusual name hasn't prevented Fools from showing it some love: Just one of the 147 CAPS All-Stars who've rated Zhongpin is bearish.

As a company recognized for its high quality, our community loves the stock as a play on the growing demand for prepared pork in China. In 2007, Zhongpin was awarded "China Top Brand" by the Chinese government, and has managed to attract blue-chip customers over the years, including McDonald's (NYSE:MCD) and Yum! Brands' (NYSE:YUM) KFC.

With consistent double-digit returns on capital, and the stock trading at a forward P/E of 7.62, Zhongpin is one piglet that Fools should at least pay attention to. 

One year ago, CAPS All-Star ddberg went hog-wild:

I'm wary of making calls on Chinese stocks, available info is limited, and stock is thinly traded so very volatile. But this one seems to make sense: huge and rapidly growing middle class in China (largest consumers of pork), no real leader in the marketplace, company is growing fast but seems to be managed well, and stock is trading at a discount to peers. Sounds like a good CAPS call to me!

Are we on the same micro wavelength?
But, of course, the real question is whether you believe these companies are micro-marvels or just small shrimps waiting to get squished. Log onto CAPS and let us know how you feel. It's absolutely free and, within seconds, you'll have access to thousands of potential stock ideas.