The Treasures of Small-Cap Investing 

Fossil (Nasdaq: FOSL)
Recent Price: $14.81
Market Cap: $986.5 million
Dividend Yield: N/A
52-Week Range: $11.51-$46.25

Ah, the '80s. Mullets, Miami Vice blazers, Bugle Boy jeans, and Fossil watches. Although we long ago dropped the first three, we haven't buried '80s phenom and Motley Fool Hidden Gems recommendation Fossil (Nasdaq: FOSL). Fossil is leveraging a well-established collection of brands across the globe, and it has generated profitable growth through good times and bad. We think the best is yet to come, and a sagging stock provides us with a great opportunity to get in.

Fossil sells not only watches, but also handbags, sunglasses, and other accessories under brands such as Michele, Relic, Zodiac, Adidas, Burberry, Diesel, DKNY, and Emporio Armani. You'll find its products in some of the nation's largest retailers as well as through international partners, its own direct-to-consumer catalog and website, and its growing network of company-owned stores.

However, international expansion is the key to the company's growth. Fossil now does half its sales and two-thirds of its wholesale business outside the United States, and this will increase because the company has placed a high priority on moving into markets such as China, Korea, India, Mexico, South America, and other areas where consumers are becoming more affluent.

Perhaps best of all, founder and chairman Tom Kartsotis and his brother, CEO Kosta Kartsotis, own 32.7% of shares. And they are committed to enriching themselves by enriching shareholders. In fact, since 2005, Kosta has worked for no compensation -- no salary, no perks, and no equity handouts. He believes his ownership in the company provides sufficient incentive.

Financially speaking, Fossil has been ticking along as reliably as one of its Swiss-made watches. The five-year compound annual growth rate (CAGR) for the top line is 16.7%, and the company's owner earnings CAGR is even higher. Returns on equity have averaged 17% over the past five years, with returns on invested capital at about 18%. Look back 10 years, and you see a similar trend. This is a company with a phenomenal history and even better prospects.

Fossil is anything but a dusty, old has-been. Its history of strong growth -- just below Wall Street's bar for "wow" -- and its founder-led culture give us great faith in its prospects. With international expansion already under way and an extra-cheap stock price, we think you'll be happy to put this gem, Fossil, whatever, into your portfolio.

Risk Takers and Rule Breakers 

GeoEye (Nasdaq: GEOY)
Recent Price: $17.73
Market Cap: $324.3 million
Dividend Yield: N/A
52-Week Range: $14.95-$37.37

It may not be a small world after all, but it's certainly a well-documented one. Want to find out how much your neighbor's house sold for? Check See how close that vacation home you rented really is to the beach? Check Google Maps. Track the route of your evening run? Break out your Garmin. All cool tools, all made possible through satellites. Motley Fool Rule Breakers recommendation GeoEye (Nasdaq: GEOY) owns and operates three satellites as well as two specialized aircraft that collect detailed, high-resolution images of the Earth. It has a huge library and is constantly collecting data, which it sells to both the U.S. government and other navigational organizations.

The current eyes in the sky are the high-resolution Ikonos and the lower-res OrbView-2. And within the past few months, the latest addition to its satellite crew, GeoEye-1, has been launched, making it the highest-resolution commercial satellite in (well, above) the world.

GeoEye-1 is able to discern an object the size of a baseball diamond's home plate, revisit any point on Earth within three days, and cover 255 million square kilometers a year (about twice the size of all Earth's land masses). And like existing satellites, GeoEye-1 can also capture infrared, temperature, and stereo imagery used to create elevation and relief profiles. That makes it ideal for large-scale mapping projects as well as defense and commercial applications.

Best of all, there's very little competition and a lot of sky-high barriers to entry in this space. GeoEye essentially operates in a duopoly -- its only real competitor is the much smaller, privately held DigitalGlobe. But the U.S. government is actually a partner and customer of GeoEye, helping fund satellite launches and providing substantial revenue.

Management is also solid. CEO Matthew O'Connell is a seasoned professional who joined GeoEye's predecessor, Orbimage, shortly after a satellite crash put the company into Chapter 11 bankruptcy protection. He led the company through that restructuring and the strategic purchase of a chief rival, Space Imaging, to create the current company. GeoEye's CFO, Henry Dubois, is the former president of DigitalGlobe, and chairman James Abrahamson is a former chairman of Oracle and former executive at Hughes Aircraft and NASA.

Best-in-the-world capability, government contracts, and commercial demand will unlock great growth for this little-known company that's undervalued even on the basis of its existing revenue and cash flow. And now that GeoEye-1 is flying high, you should consider launching your journey with this Rule Breaker.

We Are the World 

KHD Humboldt Wedag (NYSE: KHD)
Recent Price: $8.73
Market Cap: $266.4 million
Dividend Yield: N/A
52-Week Range: $6.50-$35.79

Here's something you don't see every day: a Hong Kong-based merchant bank that turns into a cement engineering company. Normally, we'd be skeptical, but in the case of Motley Fool Global Gains recommendation KHD Humboldt Wedag (NYSE: KHD), we see some real potential because this management team has a history of using capital to make wise acquisitions and create value for shareholders.

KHD sells equipment, supplies, and engineering services to the cement, coal, and mineral industries, with most of its revenue coming from developing economies in Asia and the Middle East. Its clients use these services and materials to build processing facilities or upgrade and expand existing ones.

Glamorous it isn't, but the business earns high returns and requires little capital investment -- an ideal combination. Moreover, there's been plenty of worldwide demand to drive KHD's rapid growth for the past few years.

And now, the company plans to take things a step further by expanding its cement business: Instead of merely supplying the plan, parts, and know-how to get a plant started, KHD will soon build and operate plants, too. In some cases, it might take a small ownership stake in the facility. But its main focus will be collecting fees for operating the plants. If these recurring fees are successful, they should e