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Not much to choose from yesterday general market decline, but one stock shined amidst all the red: Bitstream (NASDAQ:BITS).

ABOUT: Bitstream Inc. is a software development company that enables its customers worldwide to render text, browse the Web on wireless devices, select from a collection of fonts online and customize documents over the Internet. Bitstream categorizes its products and technologies into three product lines: fonts and font technology, browsing technology and publishing technology. The Company's wholly owned subsidiaries are Bitstream World Trade, Inc., a holding company for Bitstream, B.V. (a Dutch corporation), Pageflex, Inc. and, Inc.

FUNDAMENTALS: Itty bitty Bitstream is by all indications a company on the upswing. For the first time, the company reached profitability in '05. Over the past year, earnings have tripled on 50% sales growth. Net margins and ROE are outstanding and soaring. I've mentioned before that one key to finding the market's next big winners is to look for rising ROE and margins. BITS margins (18%) and ROE (46%) aren't rising, they have been lifting to the moon over the past 2 years.

TECHNICAL: This is a stock that trades a bit thin at 100K, but that should change in the coming months as Wall St discovers this gem. Today, the stock broke out of a base on base pattern and looks ready to tackle multi year highs around 11. If it can clear that level with volume, the next stop is 16 (all time highs reached back in 2000). Despite more than doubling in the past year, the price and volume levels indicate there is still strong demand. Relative strength is very good at 77. The stock did close in the lower half of its trading range after breaking out today, so it could move a bit lower from here in the coming days. However, the overall action indicates it may be headed higher very soon.

Full Disclosure: I currently do not hold a position in BITS.

BITS 1-yr chart:

BITS 1-yr chart