One of the fun parts of investing, whether professionally or as a private investor, is finding that special small-capitalization name and running with it. Typically, a company with a market value, or market capitalization of $1 billion or under, is considered small capitalization. Some investors place that number at $3 billion or under, but the professional investing world uses $1 billion as the measuring stick.

Many companies that trade at $1 billion or under market cap are newer, less established companies that try to make their mark in their respective sectors. With the 10-year U.S. Treasury note sporting a current yield of 5.16%, it's a tough environment for these stocks to garner attention, or serious buying. Small cap names need a friendly interest rate scene to capture serious investors interest. The "safe yields" of the 10 year note over 5% negates the attractive growth rates that small cap stocks can provide.

Small cap names tend to carry a lot more risk as they are less consistent when it comes to earnings. With "easy money" earnings north of 5%, these stocks are difficult to move up to higher valuations. Many a portfolio manager will tell you it is a great time to accumulate these types of stocks as sellers are sometimes sloppy in their selling style, thus allowing for bargain pricing for the buyers.

Small cap stocks can be the best performing sector of the market in a lower interest rate environment, but investors will scramble for larger cap, paying dividends names in high interest rate times. Consistent dividends means consistent earnings.

As we enter this second quarter earnings season, identify your small cap favorites and nibble away at bargain prices. Here are some my small cap growth ideas: Top 25 stocks for the NEXT 25 Years. Eventually, the stock market rewards earnings growth with higher valuations. Always has. Always will...

Georges Yared is the Chief Investment Strategist for Yared Investment Research.

Small-cap growth tough in current interest rate climate originally appeared on BloggingStocks on Tue, 10 Jul 2007 08:40:00 EST. Please see our terms for use of feeds.

The first company in my series of the top 25 stocks for the NEXT 25 years is about to be acquired. Color Kinetics (NASDAQ: CLRK) is being pursued by Dutch-based company Philips Lighting for $34 per share. The Dutch company is the world's largest lighting company.

The $34 per share offer represents a $688 million total acquisition price. Color Kinetics management has endorsed the deal and is encouraging shareholders to accept the offer.

Color Kinetics brings a rich portfolio of patents to the marriage. With 64 patents having been granted and another 100+ patents-pending, Color Kinetics brings to Philips the next generation technology of LED lighting products. Color Kinetics had won many high-profile lighting contracts recently, including the dash-board lighting work for Ford Motor Co. (NYSE: F). The new-generation LED-based lighting systems had not yet been economical for residential housing applications, but the market is indeed moving in that direction.

With Philips owning Color Kinetics technology, the residential market will be within its reach in the near future. Color Kinetics is selling to Philips for nearly 7 times revenues, a rich valuation, but certainly not when considering the growth rate of Color Kinetics, 35-40%, and its patent portfolio.

Oh well, we still have 24 companies left on the original list of 25 stocks for the NEXT 25 years...

Georges Yared is the CIO of Yared Investment Research.

Top 25 for NEXT 25 Years: Color Kinetics offered $34 by Philips originally appeared on BloggingStocks on Tue, 19 Jun 2007 11:30:00 EST. Please see our terms for use of feeds.

In my continuing series of the top 25 stocks for the NEXT 25 years, the next name is Progressive Gaming Corp. (NASDAQ: PGIC). Progressive Gaming is headquartered in Las Vegas, Nevada and sells its products around the world. The stock is at $5.40 and carries a current market capitalization of $210 million. PGIC provides integrated casino and jackpot management solutions to the gaming world. The company has two major divisions: slot and table games and its systems division. The slot and tables division develops, licenses and distributes branded table games like the World Series of Poker, Texas Hold 'Em and Caribbean Stud. The slots part of the division offers branded games such as Garfield, the Beach Boys and many more.

The systems division is a bit more complex in nature. Progressive Gaming has developed an RFID (radio-frequency identification) system to track players habits and gaming successes at the blackjack tables. The chips employed in the betting process are tagged with an RFID chip thus allowing the casino to know in real-time, who is betting at which tables and how much. The system falls under the CasinoLink Enterprise umbrella. The gaming industry is a natural collector of customer information to allow for profit-modeling on a per customer basis. PGIC has the patented products to supply the casinos with a soup-to-nuts solution.

The beauty of the model for PGIC is the recurring revenues. Once a blackjack table has been retrofitted for about $5000, PGIC collects a daily royalty based on usage of the table and the RFID-tagged chips. The margins on this are enormous and highly profitable. The casino-based slot machines are also on a recurring revenue model.

Continue reading Top 25 Stocks for NEXT 25 Years: Progressive Gaming -- PGIC

Top 25 Stocks for NEXT 25 Years: Progressive Gaming -- PGIC originally appeared on BloggingStocks on Tue, 29 May 2007 15:45:00 EST. Please see our terms for use of feeds.