***SMALL CAP NATION***

[Lotto123]

5. Cenveo (CVO_)

Buying on the way down. That's what insiders have been doing at this printing company.

The still-slow economy, coupled with a move toward electronic communication, has led to a pullback in demand for printed envelopes, stationary, labels and direct mail materials.

Sales of $1.9 billion in 2011 remain below the $2.1 billion peak seen back in 2008. But even with top-line challenges, Cenveo still throws off ample free cash flow: $65 million in 2011 and a cumulative $350 million during the past five years.

Yet shares remain under pressure because Cenveo carries more than $1 billion in debt.

As a result, the company generated $133 million in operating income in 2011 but had to pay out $116 million of that in interest payments.

So here's the opportunity for investors: Pay close attention to operating income and interest expense when first-quarter results are released in a few weeks, (and perhaps again in the June quarter).

If operating income is starting to pull away from interest expense, then Cenveo may have the makings of a solid turnaround candidate.