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. 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 only huge companies like 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 sporting four or five stars (out of five), with market caps between $100 million and $200 million and three or fewer professional analysts covering them.

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, Famous Dave's of America and China Fire & Security might just be a pair of small wonders worthy of your Foolish due diligence.

Barbecuing for bucks
Unfortunately, many of us will soon be storing away our barbecue grills for yet another year. But that doesn't mean we'll have to cut out our barbecue eats, as well. Famous Dave's of America, an up-and-coming restaurant chain, might just be the off-season answer to your chicken, ribs, and investing needs.

According to our community, Famous Dave's competitive edge lies in the fact that it's the only national chain devoted entirely to serving fine barbecue. Today, there are a total of 152 Famous Dave's restaurants located in 35 states, with management expecting to grow that store count by 25-30 each year.   

Famous Dave's is expanding primarily through a franchising strategy, and lately, that hasn't exactly translated to blowout growth and margin expansion. But, as fellow Fool Rick Munarriz recently wrote, rising same-store sales indicate that the concept might be catching some wind.

CAPS player bigdividends digs in:

Good long term restaurant stock. Still have not broken (substantially) into the Texas and Northern California markets. Has good growth potential which should allow steady increase in revenue. Will be interesting to see how they compete with Buffalo Wild Wings (NASDAQ:BWLD).

Fired-up Fools
China Fire & Security Group is another stock in the long tail that piques the interest of our CAPS players. Ever since Motley Fool Global Gains advisor Bill Mann and his team of analysts visited the Beijing-based provider of fire safety products last June, the stock has attracted a large Foolish following. Though it's not a formal recommendation (not yet, at least), a whopping 165 CAPS players are bullish on CFSG.

Specifically, our CAPS community is drawn to CFSG's seemingly mammoth growth opportunities. As China's leading provider of fire safety solutions, CFSG naturally stands to benefit from the country's development and, more importantly, the government's tightening of safety regulations.

Financially, CFSG looks fairly hazard-proof as well. In its latest quarter, the company reported a 38% increase in revenue and maintained a rock-solid balance sheet -- $8.5 million in cash and investments, and no long-term debt. With a forward P/E of 11.5, CFSG may be a reasonably priced growth bet.

CAPS player SapphireSeas keeps the fire going:  

Excellent company with sound financials, superb management, and deep vestment with regulators, all while operating in an industry with high barriers to entry -- a moat if there ever was one. Listed on NASDAQ from 7/16/07, where share price jumped ~ $1.10. Should just be the beginning. Buy and hold long.

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.

Buffalo Wild Wings is a Motley Fool Hidden Gems pick.

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.