There's a lot more on the line than Tom Brady's place in NFL history, Eli Manning's status as an elite quarterback, and Madonna's relevance as a pop icon.

The question is repeatedly pondered: What is the secret to Warren Buffett's breathtaking investing success? 

A little over a month ago Warren Buffett, the world’s foremost investor, announced that he wants to buy back an unlimited number of shares in his own company, Berkshire Hathaway (NYSE: BRK-A, NYSE: BRK-B) – a promising sign for both Berkshire and the financial markets as a whole.

When the world's most successful investor tells you he wants to buy back significant amounts of his company's stock, investors should listen up.

The hunt for quality small cap stocks can lead investors to some unusual places. Often, to stay on track I’ll consider one of Warren Buffett’s guiding philosophies. 

Buffett likes to put his money into the companies that make the items that he’s familiar with; hence his acquisition of railroads, Dairy Queen and stakes in Coca-Cola Corp. (NYSE: KO) and Republic Services (NYSE: RSG).

Today you can buy a 10-year Treasury bond and get a 3.11% yield - but wouldn't you rather own shares in a company that pays a better yield, and has the potential to increase in share price?

I usually try to find companies that benefit directly from higher commodity prices, but in this case, I've found a company that could benefit despite higher commodity prices...

This company pays a 3.4% dividend - and better yet it has the ability to raise or lower prices at will. That's because it takes one of the cheapest commodities on the planet (corn) and turns it into an easily consumable good - with a price markup in the triple digits. Whether you believe we're headed into deflation or inflation, pricing control is hugely important.

More on this pricing control in a minute...

Most people buy Treasuries precisely because they want safety.

Small-cap stocks went back into full-fledged collapse mode Wednesday as recession fears were stoked by dreadful retail sales, a cautious tone from Federal Reserve Chairman Ben Bernanke and the “beige book” report on the economy that showed activity weakening across the U.S. The Russell 2000 (NYSE:IWM) closed down 52.54, or 9.47%, at 502.11, the second-lowest close in more than five years. The Russell 2000 is now down 34% for the year, while the Dow is off 35% and the S&P 500 is down 38%. Today’s freefall represented the largest one-day decline of the year, just two days after the market put together the biggest one-day advance of 2008.

The market was already in a defensive posture ahead of this morning’s opening, but if the bulls were hoping for some kind of friendly surprise out of the latest batch of economic data, it just didn’t happen, which opened the floodgates of selling pressure. Then, as the morning progressed, the awful retail sales number was followed up by a speech from Bernanke that worried investors, then the afternoon ushered in the beige book report that underscored a fragile economic position right now.

When it was all said and done, the biggest headline today was likely the retail sales report, which not only slumped to the worst percentage decline in more than three years, but which was also woefully short of the forecast. For the record, September retail sales were down 1.2%, compared with the projection for a slide of 0.6%. In addition, this marked the third consecutive negative reading for retail sales — something that has not happened in some 17 years. With the U.S. economy largely driven by consumer spending, a pullback in retail sales heading toward rising unemployment was not the kind of news needed to extend the recent recovery bounce in stocks.

Fears of a global slowdown punctuated by a deep recession in the U.S. permeated all investment classes. Crude oil prices slumped to fresh 13-month lows, sinking some 5% to close at $74.54 a barrel, and the recent collapse in energy prices has been a bearish element in play for energy stocks. But the slide in commodities was more than just an energy story. Copper prices shed some 8% today and Chile’s Codelco, which operates the largest copper mines in the world, acknowledged that the 2009 outlook likely included lower prices. The Commodity Research Bureau Index of 19 . . .

Small caps have plunged this afternoon, as recession fears have gripped stocks. Already concerned about still frozen credit piping, a slew of lackluster economic data and a sobering speech by Fed Chairman Ben Bernanki only served to push the market lower. At 2:36 p.m. ET, the Russell 2000 (NYSE:IWM) was down 34.81, or 6.28%, to 519.99.

A ghastly retail sales report, hit equity markets hard this morning, causing traders to keep their fingers on the sell button. September retail sales plunged 1.2%, which was nearly double the forecast for a slide of 0.6%. This marked the largest one-month decline since August 2005. Even worse, this was the third consecutive month retail sales have fallen, which hasn’t happened in more than 17 years. With two-thirds of the U.S. economy driven by consumer spending, the plunge in retail sales signals to the reality of a consumer led recession.

Adding to the grim economic picture, factory activity in New York slumped in October, with the NY Manufacturing Survey down 24.6% to the lowest reading in some seven years.

Also, on the economic docket today, the producer price index, a measure of wholesale inflation, wasn’t nearly as dismal. The headline figure for PPI met the forecast at minus 0.4%. “Although the core component is a little worrisome, lower commodity prices and the firmer tone the USD is taking should restrain costs in the year ahead,” BMO Capital Markets economist, Jennifer Lee wrote today.

Ahead of the opening this morning, the MBA Mortgage Application Survey rose 5.1% as mortgage rates slipped; however, purchase activity remained near seven-year lows. ...

Small-cap stocks took a dive on the opening, tugged down by worries about the economy, dreadful retail sales results and ongoing concerns about clogged credit markets. At 9:53 a.m. ET, the Russell 2000 (NYSE:IWM) was down 16.49, or 2.93% at 538.39.

The stock market was already limping toward a lower opening, but the 8:30 a.m. ET release of retail sales sparked an extension of pre-market losses on futures and put a decidedly sour tone on the morning’s action. September retail sales came in at minus 1.2%, which was well below the forecast for a slide of 0.6%. This marked the largest one-month decline since August 2005, and more importantly, retail sales fell for three consecutive months, something which has not happened in more than 17 years. With two-thirds of the U.S. economy driven by spending, the slide in retail sales is an ominous sign that consumers are strapped for cash, especially with the unemployment rate on the rise.

At the same time that retail sales data came out, the market also got numbers on wholesale inflation via the PPI report. The headline figure for PPI met the forecast at minus 0.4% and clearly was upstaged by the sobering retail sales data. If you’re into obscure overseas data, the Baltic Exchange’s dry sea freight index tumbled to a 5 ½-year low overnight spurred by worries about a global recession and a deep pullback in demand for raw materials from China.

Back on the home front, factory activity in New York slumped in October, with the NY Manufacturing Survey down 24.6% to the lowest reading in some seven years, adding to the bleak tone from the retail sales figure. Earlier this morning ahead of the opening, the MBA Mortgage Application Survey rose 5.1% as mortgage rates dipped, but the purchase activity was still hovering near seven-year lows. With the consumer pinched right now by employment worries and fretting about the collapse in the stock market, it’s unlikely that the housing market is ready to explode out of . . .

Small-cap stocks are expected to open solidly lower, pulled down by soft economic numbers on the retail sales report and by heightened concerns about the recession moving forward. S&P 500 futures were down some 2.3% immediately after the retail sales report, and a 2% drop in the Russell 2000 (NYSE:IWM) would suggest an open near 543.50.

The retail sales report came in at minus 1.2%, which was well below the forecast for a dip of 0.6%. Even when stripping out awful car sales, the number was still down 0.6% as consumers retrench. Meanwhile, the PPI report hit the projection on the nose, coming in at minus 0.4%.

On the earnings front, the news was mixed overnight and also ahead of the opening as big-cap household names report quarterly results. Shortly after the close Tuesday, Intel Corp. (Nasdaq:INTC) beat the forecast, which sparked an initial rise in Nasdaq futures overnight. However, those gains were erased by the morning. In other corporate results, Delta Air Lines Inc. (NYSE:DAL) posted a larger-than-expected loss, while The Coca Cola Co. (NYSE:KO) topped the consensus and Wells Fargo & Co. (NYSE:WFC) had a solid report that initially took a bite out of overnight . . .

Small-cap stocks are expected to open lower, pulled down by news of a hedge fund closure and residual selling from Tuesday’s bearish reversal. The Russell 2000 (NYSE:IWM) was down about 0.6% in overnight trading, which would suggest an opening near 734.

Hedge fund Ospraie Management LLC, announced after the close Tuesday that they would shutter operations. The fund was thought to have had some $2.8 billion under management at the beginning of August, but was leaking oil on commodity-themed equity trades. Ospraie has ties to Lehman Brothers Holdings Inc. (NYSE:LEH) as the investment bank owns some 20% of the hedge fund. There are concerns that this will only hamper LEH efforts to either raise capital or find a buyer, and the Ospraie news overshadowed a newspaper report overseas that HSBC, a Chinese bank and several other hedge funds have expressed interest in taking a stake in LEH.

It will be interesting to see if money flow once again shifts into Treasury assets. Considering the news on Ospraie, Tuesday’s big afternoon push into safe-have assets such as Treasury products makes sense. Ahead of the opening, Treasury bonds and notes were only up slightly, which means the overnight slide in equities was fueled by other concerns.

It’s worth noting that trends that used to spark buying in stocks — lower energy prices and a strong dollar — were in play again overnight, but to no avail for equities. Tuesday’s reversal off morning highs came in the face of a massive slide in crude oil prices, which raises concerns that other elements are at play in the selling. This morning, crude oil was down about $1.20 dollars a barrel toward $108.50, and the U.S. dollar was on a roll against the euro, climbing 0.6% to fresh seven-month . . .

After opening higher today, small-cap stocks were mostly higher at mid-session, in part due to better-than expected earnings reports from large caps. Many key players reported weak outlooks, though, that put pressure on small caps. Strong economic data kept investors cautiously optimistic that the U.S. economy could start to crawl out of the red.

At 1:06 p.m. ET, the Russell 2000 (NYSE:IWM) was up 0.07, or 0.01%, at 686.82.

With earnings season well underway, large-cap stocks were driving the market — though not altogether forward. JPMorgan Chase & Co. (NYSE:JPM) reported earnings that beat estimates by more than 22%. By market value, JPMorgan is the largest U.S. bank. JPMorgan’s jump helped continue the rally of financial stocks after days of bleak news about the U.S. banking industry. On Wednesday Wells Fargo & Co. (NYSE:WFC) announced an increase of 10% in its dividend after posting solid results.

On the downside, The Coca-Cola Company (NYSE:KO) dropped 4% on below-average volume after reporting its second-quarter profits had dropped 23% from a year ago. The beverage retailer said its weak earnings were due to lowered soda demand from U.S. customers. News of the weak earnings dragged down shares of consumer goods. Internet retailer eBay Inc. (Nasdaq:EBAY) also tumbled 14% after giving an unimpressive outlook.

Government reports showed weekly jobless claims rose to 366,000 this week, a figure that was well below expectations for a jump to 380,000. Housing starts rose 9.1% while analysts had been expecting a drop of 1.5%. Despite this, single-family home construction sunk 5.3% in June to a 17-year low while construction of multi-family homes skyrocketed 42.5% from the same month a year ago.

For the first time in days, the U.S. Federal Reserve and crude oil prices weren’t in the spotlight. Crude oil was lower overnight and was down at mid-session to $133.87 per barrel, a far cry from the records highs over $147 seen earlier this . . .

Small-cap stocks were on target for a solidly higher open, buoyed by decent earnings results from key large-cap names, gains in overseas equities markets and better-than-expected economic data this morning. The Russell 2000 (NYSE:IWM) was up about 0.7% in after-hours trading, which suggests an opening near 691.

On the data front, weekly claims came in at 366,000, which was better than the forecast for a number closer to 380,000. Also, the four-week moving average dipped as did the continuing claims numbers. Meanwhile, housing starts in June staged a stunning 9.1% rise instead of a forecast drop, climbing to 1.06 million units, well ahead of the forecast for a 960,000-unit pace. However, the number was “goosed” by a change in New York City building codes, and would have actually been lower without that data quirk. The immediate response to the economic numbers was an extension of overnight gains in stock index futures products.

Large caps setting a positive tone early on included Coca-Cola Co. (NYSE:KO), United Technologies (NYSE:UTX) and JP Morgan (NYSE:JPM), all of which posted better-than-expected earnings, continuing a theme set forward Wednesday when solid results from Wells Fargo & Co. (NYSE:WFC) set a big rally in motion.

The chart picture has improved tremendously this week, starting with a sound rejection of fresh move lows Tuesday, the formation of a doji reversal candle, and the required validation of that pattern during Wednesday’s rally. If the Russell . . .

Small-cap stocks edged lower Tuesday, pulled down by hawkish comments from the Federal Reserve that spurred concerns among investors that the next rate move might be a hike to protect against rising inflation expectations. The Russell 2000 (NYSE:IWM) lost 2.63, or 0.36%, to 732.62, the lowest daily close since May 23.

Last night, Fed Chairman Ben Bernanke said that the central bank will resist rising long-term inflation, and he intimated that the economy wasn’t too fragile to move price concerns to the forefront of policy decisions. The fear of higher rates amid a sluggish economic environment ignited a global rout on stocks and bonds coming into the U.S. trading session, and stoked stagflation fears this morning. Several other Fed officials and policy makers from around the world joined in on the anti-inflation talk, magnifying the seemingly new hard stance on price issues.

It’s quite possible that the Fed and other central bank officials around the globe are simply jawboning against inflation to see what kind of response they can illicit from the market. After all, Fed is historically loathe to raise interest rates when the unemployment rate is still rising, and it’s hard to forget the surprise 0.5% jump in unemployment to 5.5% in last Friday’s jobs data — the largest one-month percentage rise in unemployment in 22 years.

With bonds and stocks sinking this morning in the wake of Bernanke’s inflation saber-rattling, investors looked for a safe-haven within equities, and found it among Dow stocks with solid earnings. The result was that the Dow soundly outperformed the Russell 2000, and the spread between the two index products narrowed. The Russell 2000 has been charging against the Dow for the last two weeks, so a pullback in the spread is not surprising. The last time the Russell made a similar dramatic run against the Dow was in mid-March, when the market was attempting to forge a bottom.

The dollar was the direct immediate beneficiary of Bernanke’s remarks, shooting 1% against the yen to three-month highs, and gaining a whopping 200 basis points, or 1.3%, against the euro. The strong dollar helped spark a reversal slide in crude oil prices, which were up some $2 a barrel in the early going today, but shed . . .

Vocus, Inc (Nasdaq:VOCS)
Lanham, Md.
http://www.vocus.com 

52-week low / high: $19.22 / $38.57
Shares Outstanding: 17.63 million
Market Capitalization: $458 million

With 70 million blogs and counting, along with new media outlets opening in record numbers, the word-of-mouth terrain is rapidly changing. Vocus, Inc. (Nasdaq:VOCS) understands this and has joined the revolution by offering a sort of PR 2.0 for today’s real-time needs. 

The company, which went public in 2005, provides on-demand software for PR management that includes focusing on media relations, news distribution and news monitoring. By automating these essential PR elements, Vocus’ software allows companies to correspond directly with the press and the public.

The company provides an information database of over 800,000 journalists, analysts, media outlets and publicity opportunities to its customers. The database includes journalist profiles, contact schedules, podcast interviews and pitching preferences, all assembled by Vocus’ media research team.

While the company’s press release distribution is typically offered on a per-transaction basis, its software is usually offered as an annual or multi-year subscription and is available in five languages. As of Dec. 31, 2007, Vocus had 2,427 active subscription customers, representing organizations of all sizes across a variety of industries, including BMW, Southwest Airlines (NYSE:LUV) and The Coca-Cola Company (NYSE:KO).

Although Vocus initially sold the software in its infancy, it changed its model in 1999 to sell the software services, instead. SaaS, or "software as a service," was an innovative way for companies to outsource work through the Internet, in lieu of buying software and training employees to utilize it. Employing the SaaS method was a turnaround point for the Latham, Md.-based company, and it has been flourishing ever since.

For the fourth quarter ended Dec. 31, 2007, net income rose about 10% to $525,000 compared with $475,000 a year earlier. Revenue for the quarter increased 35% to $16.3 million from $15 million, and for the year rose 44% to $58.1 million from $40.3 million. Adjusted earnings for full year 2007 were $9.5 million, or $0.50 per share, compared with $4.35 million, or $0.26 per share, for the same period last year.

"The significant growth we're seeing across all areas of our business is reflective of the large and untapped market opportunity for our on-demand PR software and a testament to the compelling value we deliver to our customers,” said Vocus president and CEO Rick Rudman in a press release on Feb. 5. “Given our achievements to date we expect continued growth and success for the year ahead and are very optimistic about our outlook for 2008.”

More and more media outlets and companies are popping up every day, and with every new idea comes the demand to promote it. Vocus is one company that has adapted to the ever-changing PR needs of companies across the globe. Viva la revolution.

Note: Vocus, Inc. (Nasdaq:VOCS) is on the "Watch List" of Growth Report, a subscription investment newsletter from Business Financial Publishing, which also publishes SmallCapInvestor.com. As a Watch List company, Vocus displays many characteristics found in successful stock winners, and is being closely monitored for possible inclusion in the Growth Report portfolio at a later date.

In the past, industrial customers maintained broad supply chains, contracting with numerous local distributors. This method is changing, though. Motivated by the need to reduce costs and improve inventory turns, most industrial customers are consolidating their supply chains and relying on first-tier distributors that can provide one-stop shopping. These customers are also demanding value-added services such as integrated supply, system design, and equipment fabrication, installation and maintenance. 

This supplier consolidation is creating budding opportunities for DXP Enterprises, Inc. (Nasdaq: DXPE) a leading U.S. supplier of maintenance, repair and operations (MRO) services, and KHD Humboldt Wedag International, Ltd. (NYSE: KHD), a global provider of plant design and equipment procurement services.    

KHD Humboldt provides industrial plant engineering services and equipment to mineral processors. It is a leading supplier to the global cement-manufacturing market and offers its customers proprietary technologies, plant and equipment design, and customized systems for process control and equipment optimization.

Formerly a merchant bank, KHD shifted its focus to industrial plant engineering in 2006. Since then, it has established operations in India, China, Russia, Germany, the Middle East, South Africa and the United States.

During the first nine months of 2007, KHD’s revenues grew 75% year-over-year to $418.8 million from $239.6 million and income from continuing operations climbed 102% to $38.6 million, or $1.27 per share, from $19 million, or $0.63 per share. New orders rose 123% in the September quarter to $240 million and exceeded $569 million for the nine-month period. Backlog totaled $762 million; nearly 90% of backlog was contracts in China, India, Russia and other emerging economies. KHD expects a 70% increase in full-year 2007 earnings to be between $1.70 and $1.75 per share.

Investors will expend copious amounts of time and energy looking for the next “new thing” when often the better alternative is to parse the old and the pedestrian. Consider the greatest investor of our time, Warren Buffett. Buffett has accumulated an expansive fortune by investing in companies that have either been around for centuries — The Coca-Cola Company (NYSE: KO), Wells Fargo & Company (NYSE: WFC) — or simply do simple things well — See's Candies, Inc., Wal-Mart Stores, Inc. (NYSE: WMT).

One could argue that shipping falls within Buffett's investing purview. Since man discovered the benefits of division of labor, he has persistently moved goods across the open seas because (1) it's the only means to get the goods from point A to point B, and (2) it's profitable. Case in point, Athens-based Euroseas Ltd. (Nasdaq: ESEA), an international seaborne transportation services company that specializes in shipping various drybulk cargoes — iron ore, coal, grain, bauxite, phosphate and fertilizers — across the ocean.

Not only does Euroseas move commodity goods across the open waters, it moves them profitably. In the third-quarter ended Sept. 30, the company reported net income of $9.5 million, or $0.39 per share, on revenues of $21.5 million, representing a 76.6% and 141.1% increase, respectively, over net income of $5.4 million and revenues of $8.9 million in the third quarter of 2006. The stock closed at $12.66 on Friday, with shares ranging between $6.60 and $21.52 over the last 52 weeks.

Euroseas earned its keep deploying an average of 12.13 vessels during the quarter. The utilization rate was a remarkable 99.9%, a rate likely to remain as efficient a level through 2008. Forty-six percent of Euroseas' ship capacity days in 2008 are already fixed under time charter contracts or protected from market fluctuations. Management believes that its contracting strategy provides a solid revenue base and more predictable cash flows and downside protection, while still allowing the company to participate in the spot-market during periods of rising rates.

Energy and juice beverage company Leading Brands Inc. (Nasdaq: LBIX) is poised for rapid expansion beginning at summer’s end, executives said on a midday Thursday conference call.

Before Thursday’s opening bell, the Vancouver, Canada-based business reported a loss of $0.18 million, or $0.01 per share, for the first quarter ended May 31, versus a profit of $0.26 million, or $0.02 per share, during the year-ago period. The company recorded $10.5 million in first-quarter revenue, compared with $13.2 million in the same period of 2006.

During the quarter, revenue from Leading Brands’ proprietary brands was up about 75% from the prior-year’s first quarter. The company expects sales of its TrueBlue blueberry drink to further propel revenue growth, said CEO Ralph McRae. Recently, the company announced the nation-wide distribution of TrueBlue in 7-Eleven convenience stores.

“We’re very excited about what lies ahead,” McRae said on the call. “We see a really nice growth pattern with the [TrueBlue] brand.”

Leading Brands is also looking to expand the TrueBlue drink beyond 7-Eleven stores. McRae said the company is “always” making pitch presentations to other chain stores. The TrueBlue blueberry beverage will quickly be available for sale in about half of 7-Eleven’s more than 6,000 stores, he said, but the company will have to do some work to expand to all the stores. The impact of the 7-Eleven deal will be reflected in the company’s third quarter results, McRae said.

“By the end of summer and early fall, we’ll know the success of TrueBlue,” McRae said.

In 1852, Horace Smith, who honed his skills in the firearms trade while working at the National Armory, and Daniel B. Wesson, a former apprentice to his brother, Edwin Wesson, the leading maker of target pistols and rifles during the 1840s, formed a partnership to market a lever action repeating pistol (to replace the cumbersome muzzle-loaded rifle). After struggling as a fledgling business, the company's products eventually gained prominence. The rest is, as they say, "history."
 
Springfield, Mass.-based Smith & Wesson Holding Corporation (Nasdaq: SWHC), parent company of Smith & Wesson Corp., built its reputation on producing high-quality, high-performance precision handguns. The legendary arms maker has equipped soldiers from the Civil War to Vietnam and the vast majority of American police forces. (Smith & Wesson's .357 Magnum was developed specifically for law enforcement agencies, and the world-famous .38 Special has, at one time or another, been the sidearm of choice for hundreds of police forces around the world.)
 
Known for merging age-old craftsmanship and state-of-the-art technology, Smith & Wesson produces some of the world's most coveted weapons. (It helps that their .44 Magnum was carried by Clint Eastwood's Dirty Harry character.) Smith & Wesson dominated the handgun business in the consumer, law-enforcement and military markets for almost a century.

But by the early 1980s, Smith & Wesson's market share with U.S. police departments dropped to 10% from 98% two decades earlier, as these law enforcement agencies transitioned from issuing revolvers to semi-automatic weapons. This gave the advantage to such high-profile competitors as Italy's Beretta, Austria's Glock and American rival Sig Sauer. By the end of fiscal 2002, Smith & Wesson had a net operating loss of over $5 million.

Diamond Foods, Inc. (Nasdaq: DMND) executives predicted record snack sales of around $27 million for the fourth quarter ending July 31 on a conference call Monday evening.

“It would be our biggest quarter ever,” CEO Michael Mendes said on the call.

Mendes said the Stockton, Calif.-based company can achieve this goal through a marketing agreement with The Coca Cola Company (NYSE: KO) and an agreement that puts Diamond snacks in “virtually every [Safeway Inc. (NYSE: SWY) grocery stores] in the U.S.” The Coca-Cola agreement, which was announced on the call, is a summer promotion that places Diamond snack products with Diet Coke and Classic Coke in store displays.

Diamond expects growth to slow in fiscal 2008, but lower capital expenses are anticipated, Mendes said. Mendes noted the historic high prices of tree nuts as a factor. The company’s guidance for fiscal 2007 is $80 million in snack sales, compared with $41 million in fiscal 2006.

After the close of trading Monday, the company reported net sales of $97 million for the third quarter ended April 30, up 43% from $67.8 million in the year-ago period. The snack and food company reported a net loss of $4 million, or $0.25 a share, down from a $3.1 million loss, or $0.20 per share, in the third quarter of 2006. Analysts polled by Thomson Financial expected a loss of $0.16 per share on $82 million in revenue.