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.

December 24, 2010 - NN, Inc. (NNBR-NASDAQ) engages in the manufacture and supply of metal bearing components, plastic and rubber components, and precision metal components for bearing manufacturers worldwide. The company's Metal Bearing Components segment offers precision steel balls for anti-friction bearings manufacturers; steel rollers, such as tapered rollers and cylindrical rollers; and precision metal retainers for roller bearings for use in various industrial applications.

The Precision Metal Components segment makes precision metal components, such as mechanical components and assemblies, fluid control components and assemblies, shafts, and other precision metal parts used in automotive brake/chassis, thermal air conditioning systems, commercial refrigeration, automotive engine, and other automotive and industrial applications. NN, Inc. was founded in 1980 and is headquartered in Johnson City, Tennessee.

This stock is only for people who can take the pain of seeing their investment go from $17.40 to 80 cents....in less than 6 months. Yes, only the brave need read any further. But only looking at the price isn't enough. Investors need to see why the stock bounced back to its recent high of $11.77 (on December 22). There's good news coming from NN in the form of much better earnings.

The slump in 2008 was caused by the expected large loss in 2009. Investors knew bad news was coming and the firm posted negative earnings to the tune of minus $1.43. That was after the company made 68 cents in 2008. Investors couldn't sell fast enough as the losses piled higher. They started in the final quarter of 2008 at minus 16 cents, then went to minus 50 cents and three more quarters of losses. But then they turned around and should finish at plus 81 cents this year and $1.10 next. Going from negative $1.43 to a positive 81 cents is a turnaround story, a good one, one that investors now believe.

The reason for better results is simple: demand is picking up for the products NN makes. Sales dipped to $259.4 million last year, down from $424.8 million in 2008. This year, analysts see $360.3 million, then predict $411.40 million in 2011.

To help the bottom line, costs were cut, ones that closed plants and reduced the number of employees. The company runs leaner now with better efficiencies. Two out of three of the divisions were profitable this year, but one, Precision Metal Components, added a new sales platform that had higher start-up costs than anticipated and kept it from using black ink when reporting results. But that should be corrected next year.

NN just negotiated better credit terms for its revolving credit facilities that were set to expire in September of next year. Here's what the CFO, James Dorton said about the new terms and business: "On December 21, 2010, we amended our revolving credit facility with Key Bank as the administrative agent which was set to expire on September 20, 2011. We also amended the terms for our senior notes due in April 2014 with Prudential Capital. Due to improved market conditions and our improved financial performance, the new facility carries more favorable terms than the expiring facility. The covenants are now set at levels that will allow us to fund our strategic growth projects as well as realize significant savings on interest costs."

More numbers: Price to sales ratio is .55. Price to book is 2.45. Book value is $4.68. Operating margin for the last 12 months was 3.89% and Profit margin was .28%. Return on equity was 1.23% and Return on assets was 3.36%. Total debt is $82.83 million. Debt to equity is 106%. Current ratio is .87. A very high beta of 2.90. Over the last 52 weeks, the stock is up 180%. There are 161.9 million shares outstanding. Insiders own 1.27%. Institutions have 60.10%. There is no dividend.

As you can see from the numbers, this stock needs to meet analysts' expectations to justify its price. And here's one of the nice features of NN: over the last 4 quarters, management has delivered better than analysts' predictions by 14.30%, 166.70%, 42.10%, and 76.90% respectively. If it can keep doing that and the car industry continues to see solid demand, this stock could see higher levels in the next year.

- Company Web site: www.nnbr.com

- Ted Allrich