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.

September 24, 2010 - Martek Biosciences Corp. (MATK-NASDAQ) engages in the development and commercialization of nutritional products from microbial sources, including algae, fungi, and other microbes worldwide. Its products include life'sDHA, a vegetarian source of algal DHA omega-3, important for brain, heart, and eye health throughout life, as well as for use in foods, beverages, infant formula, and supplements; and life'sARA, an omega-6 fatty acid, for use in infant formula and growing-up milks.

Martek Biosciences Corporation also provides contract manufacturing services for the production of enzymes, specialty chemicals, vitamins, and agricultural specialty products. It sells oils containing fatty acids under the names of life'sDHA, DHASCO, Neuromins, ARASCO, and life'sARA. The company sells nutritional oils primarily to the infant formula, pregnancy and nursing, food and beverage, dietary supplement, and animal feed markets. Martek Biosciences Corporation was founded in 1985 and is headquartered in Columbia, Maryland.

Here's another company that doesn't know there's a recession. Earnings go ever higher, starting in 2005 when they were 48 cents a share, then 55 cents, 65 cents, $1.09 in 2008. Last year, they reached $1.22. Look for $1.40 this year and $1.65 next year. Final quarter estimates are for 39 cents (fiscal year ends October 31) compared to 33 cents in the fourth. Look for 39 cents again in the first quarter of 2011 vs 29 cents in the first quarter of this year.

Management isn't satisfied with these solid results. It's going after costs. It's focus is a plant in Winchester, Kentucky where it will enlarge capacity utilitization, cut expenses and create more efficient operations. The workforce will be pruned. Certain manufacturing/distribution functions will be sent to a South Carolina plant. The facility may be sold or partially leased after the restructuring. Ultimately, after the asset impairment costs and restructuring expenses are taken, there should be enough savings from the moves to offset lower prices the company made on several baby formula contract extensions. Expect better efficiencies and lower costs next year as the recent acquisition of Amerifit (a health products business) contributes to the top and bottom lines.

The company is looking abroad for growth, specifically in Asia and Europe. The U.S. baby-formula business has just about reached maturity. Another growth opportunity: diversification from other uses of DHA/ARA oils in products such as food and beverages or pregnancy/nursery supplements.

Science is also helping MATK. Research continues to show healthy attributes of taking DHA/ARA oils at any time of one's life. As social trends continue to focus on better life styles, MATK's oils should see more growth.

Over the last 5 years, MATK's earnings have averaged 25% annual increases while sales went up on an average annual basis of 20%. In the next 5, anlaysts see earnings improving by an average annual rate of 13.75% while sales increase by 11%.

The stock hasn't rebounded with the rest of the market. In early 2009, it bottomed at $15.40 after reaching $39.60 in 2008. It ran back to $32 but then faltered again, hitting $18 this year. Now it's trading about 25% above that bottom so valuations are attractive.

More numbers: Price to sales ratio is 1.80. Price to book is 1.12. Book value is $20.17. Operating margin for the last 12 months was 19.18% while Profit margin was 10.77%. Return on equity was 6.94% and Return on assets was 6.70%. There's $26.52 million in cash for 79 cents a share. Total debt is $4.26 million or about 4% of capital. Current ratio is 3.89. Beta is .70. The stock is down 6.04% for the last 52 weeks while the S&P 500 index, in the same time, is up 5.36%. The 52-week low was on December 10, 2009 at $17.09, the high on June 25, 2010, at $25.03. There are 33.47 million shares outstanding with a Float of 33.21 million. Insiders own 1.79%. Institutions have 100% of the Float. There is no dividend.

This stock has been relatively range bound for the last year, almost like it's building a base (in chartists' terms), ready to move higher. It only needs a catalyst to spark the change. With earnings set to improve over the next year, it seems investors see the price getting near the top of the range and are reluctant to push it higher. But if it reaches $25, it may be meaningful if it breaks through. It just might continue on to the all-time high of $73.40, set back in 2004. That's only possible if earnings increase faster than already projected.

- Company Web site: www.martekbio.com

- Ted Allrich