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. Because Wall Street is covering fewer stocks than ever before, this is a great time to start looking for tiny treasures.

3. Micro-caps 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 as an "outperform" or "underperform." In turn, each investor is rated, as is each stock.

The end result is that while only huge companies such as Google (NASDAQ:GOOG) 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, have market caps between $100 million and $200 million, and have three or fewer professional analysts covering them.


Market Cap (in Millions)

Number of CAPS Ratings


Current Analyst Recommendation

Supertel Hospitality (NASDAQ:SPPR)




Strong Buy

Delta Apparel (AMEX:DLA)




Strong Buy






U.S. Home Systems (NASDAQ:USHS)





Key Technology (NASDAQ:KTEC)





Data from Yahoo! Finance and Motley Fool CAPS (as of 6/13/07 close).

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, Supertel Hospitality and TESSCO Technologies might just be a couple of small wonders worthy of your Foolish due diligence.

Hospitable hotels   
As a multibagger hunter, I'd rather see my companies grow with retained earnings, rather than distribute a taxable dividend. However, Supertel Hospitality, an economy-hotel REIT whose stock price has quadrupled in the past five years, shows us that investment homers can be hit in several different ways.  

In the face of an economic downturn, Supertel struggled to keep its dividend (and stock) alive in 2001. Since then, the company has sold its underperforming hotels, strengthened the balance sheet, and, as of late, has been on a hotel-buying spree. By the end of July, management expects to own a portfolio of 122 hotels under well-known brand names such as Super 8, Holiday Inn Express, and Comfort Inn.

With a recent history of growing dividends and a current yield of 6%, Supertel's shares might also offer guests a good night's sleep. CAPS resident HoldSideAnalyst shows some super hospitality with this quick pitch:

Unsexy REIT buying discount motels. These little motels just pump out cash. In a world of REITs gone nuts, these guys are still a pretty good value with a decent yield. Classic small cap ignored by Wall Street.

System TESS-ting 
TESSCO Technologies, a Maryland-based operator of wireless mobile systems, is another stock in the long tail that piques the interest of our CAPS players. The company's MO is to be the total source provider to the wireless industry, so, naturally, this is largely a play on the booming growth of voice and video applications.   

TESSCO has managed to grow its revenue, operating income, and earnings in the double-digit range over the past three years, while the stock has returned nearly 300% in the same period. The bad news is that the wireless distribution business is a brutally competitive one, with bigger fish such as Embarq (NYSE:EQ), Brightpoint, and Anixter all swimming in the same pond.

However, add in a bargain-like EV/EBITDA ratio, and the knowledge that founder and CEO Robert Barnhill still owns nearly 40% of the company, and you've still got plenty of reasons to at least stay connected to TESSCO. CAPS All-Star pennysplants looks like the total source of information on this one:  

Good value (EV/EBITDA @ 6.3). Good growth (revenues and earnings YOY). Well managed. Balance sheet looks strong. Should outperform S&P with average risk. VERY HIGH insider ownership. Under the radar (only one analyst). ... Sure, it's speculative. But TESS is a 5-star CAPS stub in my book.

Are we on the same micro-wavelength?
But, 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.