As a continuation of our series highlighting The Top 8 Small Cap Companies for 2008, that includes our best-of-breed small cap ideas in each of eight major market sectors, here’s our research thesis and long case for our top industrial pick for 2008: Hardinge, Inc. (HDNG):

Misinterpreted 3Q07 Results Grind HDNG Valuations to the Extreme

CSP, Inc. (nasdaq: CSPI) is a tiny tech company that provides best-of-breed IT solutions, systems integration services, and high-performance computer systems. Their systems segment supplies high-performance Linux cluster systems for a broad array of defense applications, including radar, sonar and surveillance signal processing. Their MODCOMP subsidiary provides IT solutions and systems integration services.

In a "previous life" we first discovered Rockwell Medical Technologies, Inc. (RMTI) back in January of 2006 trading just above $4.00 per share. A lot has happened since then, both good and bad, but now look. The stock recently rebounded from a low below $5.00 and the Company has successfully navigated some serious growing pains and appears to be solidly "back on track."

It’s that time of the year again: time to take some profit off the table and sell the big losers. It’s also time for our year-end special report highlighting our best smallcap ideas for the upcoming year.

We have divided this special edition into EIGHT major market sectors and name our single best-of-breed small cap for each sector, along with a handful of other interesting names to watch. The eight sectors include: 1) Materials; 2) Energy; 3) Industrials; 4) Services; 5) Consumers; 6) Healthcare; 7) Technology; and, 8) Telecom.

In the face of an extremely difficult market environment, we searched for a new small cap stock with all the right defenses: market leadership, demand, growth, value, visibility, technical momentum, lots of cash, zero debt and a risk/reward profile with built-in upside and a measured downside. We think we found it all in this week's selection, with one exception... it's in China. WAIT! Before you change the channel, hear us out.

ShengdaTech, Inc. (nasdaq: SDTH) operates in two segments vital to a number of important economic industries. The Company's chemical's segment is a steady cash cow helping fund their exciting and rapidly growing nano-materials business, primarily the production of Nano Precipitated Calcium Carbonate (NPCC).

If you like these two sector favorites, Pharma/Biotech and Technology, then you'll love Bio-Imaging Technologies, Inc. (Nasdaq: BITI). Pharmaceutical companies are under increasing pressure to cut costs while continuing to fill pipelines and crank out blockbuster drugs and medical devices in the face of increasing regulatory scrutiny. The number, length and costs of clinical trials is on the rise and the trend is only getting worse. Bad for Big-Pharma, but great for the organizations that help conduct these trials.

Dow Jones and Barron's supported our emerging trend thesis recently in two separate articles entitled, "Drug-Research Firms Look Set For More Growth" [DJN] and "The Very Pictures Of Health" (Barron's). Both articles highlight the pressures causing tremendous and long-term opportunities for Contract Research Organizations (CROs). These trends are also driving demand and growth for BITI, who may not be a turnkey CRO, but a company that plays a critical role in clinical development areas requiring medical imaging such as oncology, musculoskeletal, central nervous system, neurovascular and cardiovascular.

One of the first reasons to like Versar, Inc. (AMEX: VSR) is the fact that they participate in three of today's hottest markets: Defense, Infrastructure and Environmental Services, three of our favorites. VSR has also spent the last few years transitioning from a consulting company to a more profitable project/program management company and FY07 results indicate the move is paying off.

We believe VSR is uniquely positioned to take advantage of an early-stage spending spree across all three of these markets. Two of the biggest multi-year catalysts include long delayed, multi-billion $ spending for the U.S. Base Realignment and Closure of 2005, or BRAC-2005; and, ever-increasing reconstruction and infrastructure work in Iraq and neighboring countries.