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In his famous book "One up on Wall Street," Peter Lynch expressed that if an investor finds a stock that no analyst has ever visited, or that no analyst would admit to knowing about, the stock could be a potential winner. In other words, Peter Lynch liked smaller companies with lesser known names. I like to write about non well covered companies with improving fundamentals and growing institutional sponsorship. In order to generate strong long-term returns it is essential to analyze stocks that are not well covered by the typical Wall Street research. In the article I describe several companies from the Small Cap Russell 2000 Index that could be great picks for a long-term oriented investor.

3D Systems (DDD)

I think that 3D Systems is one of the most interesting non well covered opportunities in the growing 3D printing sector. The company is a global provider of three-dimensional ("3D") content-to-print solutions including 3D printers, print materials, on demand custom parts services and creative content development for professionals and consumers alike. 3D integrated solutions enable complex three-dimensional objects to be produced directly from 3D digital data without tooling, greatly reducing the time and cost required to produce prototypes or customized production parts. A combination of strong growth, superb fundamentals and constructive technical action makes me interested in this company at current levels.

3D Systems is the leader in the 3D printing category and the company continues to invest and innovate to keep generating solid growth. The Consumer Electronics Association says overall 3-D printer sales will hit $5 billion in five years, a 30% compounded annual rate of growth from the $1.7 billion level it currently sits at. Investor's Business Daily previously pegged the long-term growth rate at 16% through 2020. In fact, the company reported a solid second-quarter growth, increasing revenue 52% over Q2 2011 on 112% printer unit growth and 20% organic growth across all categories. Backlog grew by 28% sequentially to $12.3 million at the end of the quarter on continued strong demand. I like the fact that the company grew its gross profit significantly, increasing 71% on higher revenue and 570 basis points GPM expansion to 51.4% over Q2 2011, driven by significant on-demand parts and printers GPM improvement.

The stock is up 158% year to day but it has been consolidating in the range of $43 and $33 for the past 8 weeks. I think that the stock will keep moving inside its consolidation range for the next weeks before resuming its current uptrend. By analyzing the stock´s recent price history and current price of $37, it is clear that the market is bullish on 3D Systems' future prospect.

3D has a strong ROE of 18% and its operating margins and EBITDA are its highest in the past 10 years. The company has a strong Free Cash Flow/Sales of 10.61% compared with 5.3% just 2 years ago.

Several prominent institutions bought DDD last quarter, including AQR Management, BlackRock, UBS and Fred Alger Capital Management.

Barnes & Noble (BKS)

Barnes & Noble continues to experience positive trends in its Juvenile, Gift and Toys & Games businesses as a result of the successful execution of new marketing strategies. Other categories such as Café and Newsstand also improved as a result of increased store traffic.

The company has leveraged its unique assets, iconic brands and reach to become a leader in the distribution of digital content. The company in 2009 entered the eBook market with its acquisition of Fictionwise, Inc., which is a leader in the eBook marketplace, and the popularity of its eBook site continues to grow. Since then, BKS launched its NOOK brand of eReading products, providing a fun, easy-to- use and immersive digital reading experience. With NOOK, customers gain access to the company's expansive NOOK Bookstore of more than two million digital titles, and the ability to enjoy content access to a wide array of popular devices.

In the last earnings report, BKS showed strong digital content sales growth of 46% while its bookstore comparable sales increased a good 4.6%. The company turned from an EBITDA loss last year to slightly positive EBITDA in the first quarter of this year. I like the fact that BKS is expanding the NOOK digital bookstore and devices beyond the U.S. market. BKS will start working with U.K. retailers to bring millions of U.K. customers one of the best experiences in digital reading.

The stock is up just 1.9% year to day, trading at $14.45. The stock has been moving inside the range of $17 and $11.50 since 2010. I think BKS price history reflects that the stock could be an attractive opportunity to buy the shares and sell calls with $17 strike in order to profit from the fact that BKS offers either limited upside or downside, an ideal scenario for the covered call option strategy.

Several institutional investors bought BKS in the recent quarter. Michael Price, Diamondback, T2 Partners, Citadel and Credit Suisse among others initiated a position in the stock last quarter, showing evidence that professional investors think this company is a buy at current levels.

Avis Budget Group (CAR)

Avis Budget brand is significantly under penetrated in the European market. In fact, its European market share pales in comparison with its presence in the rest of the world. The company is executing a new sales approach selling both Budget and Avis brands with an integrated sales team along with tapping channels that were previously under served. In the last quarter alone, Avis signed agreements with American Express, Expedia and several other major and discount airlines. In addition, Avis management has adjusted the price point for Budget to where it belongs, which is at the higher end of the value segment, not competing with Avis, Hertz and Europcar, but more generally with the 35% of the market that the independents comprise. This is a significant point, because in a perverse kind of way, the economic challenges in Europe may actually help Budget in the long run, as management expects the smaller independents will find it increasingly hard to secure access to capital to re-fleet.

Avis management also substantially expanded Budget's presence in Europe by launching it in Spain, reacquiring the rights and relaunching the brand in Italy and adding new locations in France, Germany and the UK, all in some measure taking advantage of the company's existing Avis infrastructure.

Avis Budget shares trades at $17.06, 10% below its recent 52-week high. The stock is up 57% year to date and it is interesting to note that every time the stock went down for 2 or 3 days in a row, bullish investors were quick to buy the shares, creating a solid and fast rebound that is clearly seen in the stock´s price chart. This is evidence that institutional buyers are accumulating shares of this company.

According to Zacks Research, Avis follows a core global strategy of partnering with leading travel brands to expand its customer reach while creating additional demand. The company recently made its first appearance in Taiwan, in an effort to expand its Asian operations. Avis Budget's decision to enter Taiwan is backed by growing car rental demand on the island as well as its speeding economic growth.

Moreover, in order to expand its geographical presence, the company is proactively looking for strategic acquisitions and alliances to enhance its growth opportunities. The recent acquisition of Avis Europe is one of the major steps taken by the company to enhance its operational foothold in global markets, especially in China and India.

Several important institutional investors bought Avis last quarter. Some of them were Vinik Asset Management, Citadel Advisors, Oaktree and Bogle Investment Management.

Source: Non-Followed Companies That Pros Are Silently Buying