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 6, 2010 - Diamond Foods (DMND-NASDAQ) sells a wide array of tree nuts and value-added nut products. Walnuts accounted for 47% of its 2009 sales, but Diamond also offers almonds, Brazil nuts, hazelnuts, pecans, pine nuts, and peanuts for use in home cooking, snack foods, in-shell eating, and as ingredients for other food manufacturers. The company, whose primary brands are Diamond, Emerald and Pop Secret, also sells nuts to restaurants and other foodservice operators. In addition to US markets, Diamond Foods does business internationally, mostly in Germany, Japan, the Netherlands, South Korea, Spain, and Turkey, but in all over 100 countries.

On the earnings side, 2009 finished with $1.45 a share, up from 91 cents in 2008 and 53 cents in 2007. For 2010, 7 analysts forecast $1.85, then $2.37 for 2011. Next earnings release will be on May 27 for the third quarter (fiscal year ends July 31). Expectations are for 20 cents a share, up from 16 cents in last year's third period. For the fourth quarter, look for 30 cents a share, above the 25 cents of last year's fourth.

Clearly this company is growing the top and bottom lines meaningfully and that deserves attention.

A lot of the bump in sales and earnings will come from the recent acquisition of Kettle Foods, a maker of potato chips, tortilla chips and other snacks. Kettle grew by double digits annually over the last several years, reaching $261 million in sales for the last 12 months ended January 31. Operating margin was almost 25% which is more than double the operating margin for Diamond. Analysts see the purchase as accretive to earnings after 2 quarters.

Management is busy cutting costs, even as sales are booming. Some of the moves to save money: consolidating processing and warehouse facilities, using less expensive package processes, streamlining distribution, and investing in technology to optimize refrigeration and lighting. Total cost savings should come close to $4.4 million a year.

New products are coming. A breakfast offering has been well received as has the 100 calorie-per-bag products. These are meant for mass merchandise channels where the company has plenty of room to grow. This year the marketing effort will be in U.S. grocery stores. Analysts estimate these new products could add $50 million to total revenues.

More numbers: Trailing P/E is 24. Price to sales ratio is 1.56. Operating margin for the last 12 months was 9.05% while Profit margin was 5.20%. Return on Equity was 17% while Return on Assets was 7.23%. There's total cash of $11.96 million for $ .57 a share. Total debt is $97.52 million or about 29% of capital. Current ratio is 1.36. Book Value per share is $11.86. Price to book is 3.67. Beta is a very low .40. 52-week low was $22.67 on May 21, 2009; 52-week high was $46.36 on April 26, 2010. There are 21.13 million shares outstanding with a float of 20.54 million. Insiders own 17.43%. Institutions have 63.70%. The annual dividend is 18 cents for a yield of .40%.

This is still a small stock, subject to small stock concerns. But investors like it. Valuations are rather high. The stock has moved up nicely since its low of $15.90 in late 2008. With a new acquisiton and cost cuts, earnings should continue to impress. Aggressive investors will find plenty to like here.

- Company Web site: www.diamondfoods.com

- Ted Allrich