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Company: Hauppauge Digital (HAUP)
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  Interesting Risk to Reward Ratio

Nov 2008 - Sales double from 50 mil to over 100 mil over last 5 years. Float remains non-dilutive for valuation. In last 10 years, only 17% dilution from 8.6 to just over 10 million shares outstanding. Although profit margins lean, HAUP has booked 10 mil plus in profits during last 5 year period. Purchased Pinnacle PCTV complimentary line from AVID at what might turn out to be shrewd move at the right price. Valuation: historical floor of 25 to 30 million in market cap, but now carries market of only 9 million. Company transitioning for all digital TV era, sells TV tuners for computers in various hardware forms, personal video recorders, with related TV software. Assuming demand continues to rise for "TV" on desktop and notebook computers, HAUP might begin another growth cycle in sales and increasing profits. Caveat, and as not determined yet, is the effect of internet based free tv and other content streamed free or on pay basis. HAUP products do allow for cable of satellite hookup to its tuners, however. ALl MICRO-CAPS have a higher volatility than large caps, so buy only that amount of shares over time, allowing for the possibility of as much as a 40% loss of capital.For every $2,000 be prepared to lose $800. And make sure that any 40% loss does not comprise more than 7% of your over all investment capital. IF I AM RIGHT, however, let your profits ride as sales grow. If you do not find yourself incurring a 40% stop loss, give this stock time to prove itself. Disclosure: I currently own this stock at current price levels. Do not bet the ranch on this one. Follow my volatility rule and protect yourself from a loss inordinately large for your portfolio size. As titled above, however, this stock might just be a winner over a 3 to 4 year horizon. Our financial and credit debacle, and market liquidations might just have made this stock a bargain. Time will tell. Some negatives are in order too. Comp USA was a distributer and now out of business, So is Circuit City, and they have filed for reorganization. However, if I am correct about demand for over the air free content, and its free supply (based on advertising, as in now to be defunct analog era), then HAUP will increase distribution in the brick and mortar world once again, as well as do more business online.

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