Dow Jones 7804.51 -38.60 11:30 am PST, February 12, 2003  NASDAQ 1288.75 -6.71 For info, visit access.smallcapnetwork.com S & P 500 824.31 -4.89 To be removed, please click here Russell 2000 357.52 -2.44 VOLUME 02: ISSUE 97 Caffeinate Your Investments As we watch gold and oil do the war watusi, are there are other commodities we might put on our investment dance card? Chances are you're drinking one right now. In the coffee space-no surprise here-Starbucks (SBUX: NASDAQ) is the 800-pound gorilla. With a market cap north of $8.5 billion, and a store every 12 feet, chances are, if you drink coffee-the statistics suggest you do-you've had either one of their basic blends or a grande designer coffee that costs more than the annual incomes in some third world countries. Go ahead, have another cup. Over 50 percent of Americans down an average of 3.3, nine ounce cups of java every day. Another 28 percent imbibe occasionally. Scandinavians are the largest swillers of coffee at around 30 lbs per year. Iceland is the hardest place to get a coffee fix; as the locals drink only 2.25 lbs per year, each. And in Turkey, if a husband doesn't provide his wife with her daily coffee, she can legally divorce him. Geez... Globally, 400 billion cups of coffee are poured each year. While US consumption has actually declined over the last twenty years, growth in Europe has picked up the slack. Nonetheless, Americans still drink 350 million cups a day. It is still the primary way caffeine is administered.  What's the point of De-Caf? Two small-cap companies that spilled across our radar screen recently were Green Mountain Coffee (GMCR: NASDAQ) and Peet's Coffee and Tea (PEET: NASDAQ). Although quite illiquid (ironically), and despite having share prices that have declined --along with everything else-- over the last year, the outlook for these two little outfits appears bright. Neither of these wholesalers/retailers has stores-- as does SBUX -and they appear to be content to stick to their respective knitting-growing their core businesses without a lot of fanfare.  Green Mountain is projected (at First Call) to earn 84 cents for fiscal 2003. With the shares at $14.35, that's a projected price/earnings ratio of 17 times. As for Peet's the same ratio works out to a slightly less compelling 22 times. By comparison, against 2003 projected earnings, Starbucks throws off a price/earnings of 32 times at its current share price of $22. A social conscience also comes with each company through significant monies earmarked for philanthropy at home and in the fields of those countries that supply the beans. No extra charge, but in this time of grasping corporate idiocy, it's priceless. Cash may have had no conscience in the past, but the times, thankfully, are changing. Don't get stuck in the big cap rut Have a look at these two and then do some homework. Expand your investment scope. Find the Wal-Mart equivalents within an industry-high or low tech - that you favor or know something about and look for smaller versions. I'm not going Lynchian on you, but the man, boring as he is, did have a point.  The other day, someone asked me: What's the first thing one should look for in a potential investment? My answer never changes: Understand what it does. Then make sure it has low debt and lots of cash. If the answer is Yes to those two questions, then you are in a position to begin your due diligence. Another key factor? The company must have an underlying market in which growth is unlikely to decline. Ever. Like coffee.... Good business isn't an oxymoron. It should be a given when your money is on the line. There is more to life than high technology and once you find an 800-pound gorilla in a solid industry, look to the smaller prodigies. It matters little whether you're interested in the latest rocket science or who makes the java jacket on your double decaf extra-hot frappuccino with a twist. FYI The best performing stock for 2002 (according to CBS MarketWatch) was Customer Relationship Management (CRM) software company Firstwave (FSTW: NASDAQ). It peaked at around $18 in December 2002 and is currently sub $11. The winners for the three previous years were NVIDIA, Enron (yes, that Enron) and Qualcomm, respectively. Can you say kiss of death? Not a club in which I'd want to hold membership. D I S C L A I M E R : The SmallCap Digest is an independent electronic publication committed to providing our readers with factual information on selected  publicly traded companies. SmallCap Digest is not a registered investment advisor or broker-dealer. 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