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.

June 30, 2008 - NN Inc. (NNBR-NASDAQ) manufactures and supplies precision bearing components for bearing manufacturers worldwide. It offers precision steel balls to anti-friction bearings manufacturers; steel rollers, such as cylindrical rollers for applications in hydraulic pumps and motors, and tapered rollers for tapered roller bearings that are used in automotive gearbox and wheel bearings, and various other industrial applications; and precision metal and plastic retainers for ball and roller bearings.

The stock recently broke out of a rather narrow trading range its inhabited over the last 6 years. Since the beginning of the year, the price is up 80%. The biggest reason for the spurt: earnings should improve more than 40% this year.

Earnings last year were 74 cents a share, down from 83 cents a share in 2006 which were below 2005 at 87 cents a share. An analyst is looking for $1.03 this year and $1.20 next year; only 1 analyst from the Street follows the stock. Revenues were $421.3 million last year. The analyst expects $458.7 million this year and $480.1 million next year.

Operating margins will improve this year thanks to plants at Whirlaway Corp. (purchased in 2006), one in China and one in Slovakia. Each will have higher utilization because of new orders in their respective regions. All three had a rough year in 2007 with idle capacity. European economies continue to thrive in the automotive and industrial end markets, driving more orders for NN. While demand is slow in the U.S. for autos, the industrial market remains healthy. Look for higher pricing to customers due to raw materials costs as well as expense reductions in the Asia and Slovakia plants to benefit margins.

Precision Metal Components (16% of 2007 revenues) should contribute more to the bottom line this year. Operating profits improved by 1400% in the first quarter because of very low demand in the HVAC sector in 2007. Orders are back to normal again, creating more profitability for the group. New business as well as better efficiencies in labor and manufacturing supplies will boost the bottom line as well.

The company generates enough free cash flow to have some options. One of them is to buy back shares. It bought 1 million shares last year (out of a total of 16.85 million at the beginning of the program). There is $25 million earmarked for more stock purchases.

More numbers: Price to sales ratio of .48. Forward P/E of 11. Price to Book 1.45. Operating Margin is 5.86%. Return on Equity is 12%. Debt to equity is .77. Current assets are 1.6 times current liabilities. Book Value is $9.09. There are 144,150 shares short.

NN, Inc. is another small company that makes a basic necessity for industrial economies. With the Far East booming, demand for what NN makes will only increase. It has a factory there and will most likely expand as orders improve. It's also well situated in Europe where most economies are healthy. It's buying back stock which should boost earnings per share. Digging deeper into the numbers and story should be worthwhile for aggressive investors.

- Company Web site: www.nnbr.com

- Ted Allrich