This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

May 21, 2008 - CPI Corp. (CPY-NYSE) gets the picture. One of the largest preschool portrait photographers in the US, the company operates about 1,040 Sears Portrait Studios in all 50 US states, Canada, and Puerto Rico. Most of the stores are located in Sears outlets, although about 40 operate under the Sears name but not in a Sears store. Its portrait studios offer digital imaging technology and a choice of poses and print sizes, as well as photo accessories. The studios accept the Sears charge card and benefit from the use of Sears' daily financial and bookkeeping operations and other services. CPI pays Sears up to 15% of total sales (in Sears stores) to use the Sears name. In June 2007, CPI acquired rival PCA for about $83 million.

Management knows it needs to cut costs. Sales commissions are lower, so are other employment costs, saving $3.9 million in 2007. The full assimilation of PCA (called Picture Me Studios) will eliminate duplicate costs at the management level. Furthermore, pictures in digital formats will become more of the standard than the exception, bolstering operating margins. By the end of this year, all outlets should be using digital.

Other numbers: Profits should be $1.00 this year, $1.50 next year. In 2006, they were $2.57 a share. A dividend of 64 cents a year gives a 3.4% yield and takes about 65% of earnings. Net profit margin is a slim 1%, down from 5.6% before the PCA acquisition. Sales should hit $460 million this year, up from $425 million last year. Expect $500 million next year. Officers and directors own about 19% of the stock. There are 6.4 million shares outstanding with an average of 48,000 shares a day trading in the last 30 days.

No question there are a couple of things weighing on CPY: working through an acquisition and an economy that seems to be getting worse. One of the easiest things not to spend money on is a photo, especially a posed photo in a studio. Still certain family occasions seem to demand them. When the new economies of scale begin to show along with the use of a digital format throughout all stores, this company should do much better. Of course, the economy has to be healthy in order to see this stock get anywhere near its old highs.

- Company Web site: www.cpicorp.com

- Ted Allrich