Hey there, Fools. We're back again to help you identify some of the most attractive micro-cap stocks worthy of your investment dollars. Just as a reminder, 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 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, as is each stock.

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

Drum roll, please ...
So without further ado, here are five CAPS stocks that sport four or five stars (out of five), that have market caps between $100 million and $200 million, and that three or fewer professional analysts are covering.


Market Cap

Number of CAPS Ratings


Current Analyst Recommendation

OMNI Energy Services (NASDAQ:OMNI)

$192 million



Strong buy


$188 million




Northrim Bancorp (NASDAQ:NRIM)

$170 million




National Atlantic Holdings (NASDAQ:NAHC)

$156 million



Two hold, one sell

Portec Rail Products (NASDAQ:PRPX)

$121 million



Strong buy

Data from Yahoo! Finance and Motley Fool CAPS as of July 3.

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, OMNI Energy Services and VSE might just be a pair of small wonders worthy of your Foolish due diligence.

OMNI-potent All-Stars?
It's no secret that rising fuel prices represent one of our CAPS community's favorite supertrends. But when you consider using an underfollowed micro-cap to play that trend, you've got a Foolish bonanza on your hands. Despite its lack of coverage, OMNI Energy Services has a whopping 125 bullish All-Stars in its corner -- with zero bears.

Over the last five years, the Louisiana-based oilfield service provider has grown revenue at a compounded rate of 38%, while providing returns on capital in the mid- to high teens. Also, CAPS Fools love how OMNI's numerous segments -- seismic drilling, environmental services, equipment leasing, and transportation -- offer a diversified way to get into the oil business. With an EV/EBITDA of 8.5 and a forward P/E of 10.6, OMNI is worth researching.

CAPS All-Star MarkBDow makes his bullish case:

More debt than I usually like but an essential segment for the energy industry, and one in which there will be much more investment now that oil prices are higher. Profit margins have improved dramatically and I anticipate that this trend will continue for at least the next 2 to 4 years.

The multibagger next door
Fool HQ neighbor VSE is another stock in the long tail that piques the interest of our CAPS players. As with OMNI Energy, our community likes the Alexandria, Va.-based company as a play on a wider industry theme. But instead of rising oil prices, VSE seems to be capitalizing on a geopolitical supertrend.

VSE provides a wide range of engineering services to the U.S. government -- particularly to the Navy, Army, and Air Force. Since July 2002, the stock is up more than 900% on rampant defense spending, and our community believes that trend will only continue. If that sounds a little too speculative, know that VSE has paid a dividend in each of the last 10 years -- pretty rare for a micro-cap multibagger.

VSE trades at a reasonable EV/EBITDA of 11 and -- using its historical five-year earnings growth rate -- a PEG of 0.30, so there might be plenty of room left to run.

Fellow Fool and CAPS All-Star TMFMmbop spends some time on his defense:  

Cyclical industry but market soured on VSEC when the Democrats took over control of Congress and the outlook for defense spending going forward was clouded. Regardless of the specific policies employed over the next few years, I think defense spending will remain strong given the geopolitical climate. Expect VSEC to snag some of those contracts.

Are we on the same micro-wavelength?
Of course, the real question is whether you believe these companies are real micro-marvels -- or just small shrimps waiting to get squished. Log on to 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. Join now -- more teeny-tiny treasures await their discovery.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool's disclosure policy is never too small to be seen.