This Month's Foolish 8 Stocks

This article is part of our Rising Star Portfolios series.

Over the next couple of days, I'll be gathering more small- and mid-cap candidates for my Rising Star "multivitamin" portfolio using my Foolish 8 and modified Foolish 8 screens. Today, I'll present the Foolish 8, which was developed by Motley Fool co-founder David Gardner to identify profitable, rapid-growth, small-cap stocks. Here are the eight criteria:

1. Revenues: $500 million or less.
2. Earnings and sales growth: 25% or greater.
3. Net profit margin: 7% or greater.
4. Daily dollar volume: $1 million to $25 million.
5. Insider holdings: 10% or greater.
6. Share price: $7 or greater.
7. Relative strength: 90 or greater.
8. Operating cash flow: a positive number.

The contenders
Twelve companies passed the screen this month:

Company	Market Cap  (in millions)	Business	Add to Your Watchlist
3-D Systems (NYSE: DDD  )	$1,128	3-D printers and products	Add
Acme Packet (Nasdaq: APKT  )	$4,375	Communications equipment	Add
Financial Engines	$1,084	Portfolio management services	Add
Gulfport Energy (Nasdaq: GPOR  )	$1,439	Oil and gas	Add
HFF	$521	Commercial real estate	Add
Houston American Energy	$581	Oil and gas	Add
Interactive Intelligence (Nasdaq: ININ  )	$644	Business software	Add
IPG Photonics (Nasdaq: IPGP  )	$3,284	Networking equipment	Add
Nanometrics (Nasdaq: NANO  )	$420	Scientific & technical instruments	Add
Preformed Line Products	$376	Electrical networking	Add
Transcend Services (Nasdaq: TRCR  )	$300	Medical transcription	Add
Virtusa	$510	IT consulting	Add

Source: Capital IQ, a division of Standard & Poor's.

The new stocks on the list this month are Financial Engines, Houston American Energy, and Nanometrics. No companies dropped off from last month.

Biggie smalls
Here's a look at some interesting metrics for these small fries:

Company	Insider Ownership	Forward P/E	EV/FCF (TTM)	ROE	Net Margin
3-D Systems	12%	64.9	36.6	16%	14%
Acme Packet	18%	90.9	215.3	17%	19%
Financial Engines	21%	69.1	NM	43%	54%
Gulfport Energy	19%	28.1	NM	26%	40%
HFF	19%	33.3	NM	25%	9%
Houston American Energy	39%	200.2	NM	45%	123%
Interactive Intelligence	24%	25.4	33.2	18%	9%
IPG Photonics	26%	65.6	146.8	23%	21%
Nanometrics	25%	10.2	155.4	40%	28%
Preformed Line Products	48%	15.1	NM	15%	8%
Transcend Services	12%	32.5	28.1	16%	11%
Virtusa	13%	30.6	125.5	8%	7%

Source: Capital IQ, a division of Standard & Poor's. P/E = price-to-earnings ratio; EV = enterprise value; FCF = free cash flow; TTM = trailing 12 months; ROE = return on equity.

The NM above stands for "not meaningful," which is the result of dividing by negative free cash flow. (In this case I'm using Capital IQ's unlevered free cash flow definition.) If any of these companies look interesting enough for me to research further, I'll delve more into the reasoning behind the negative FCF.

Tomorrow I'll show you the results of this month's modified Foolish 8 screen, and then talk about the companies that interest me from both screens in more depth.

If you're interested in keeping up with any of these companies, add them to your free watchlist by clicking the "add" button in the far-right column of the top table. You can also follow me on Twitter and check out the multivitamin discussion board. Until tomorrow!

This article is part of our Rising Star Portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time free stock picks. See all of our Rising Star analysts (and their portfolios).