I’m always looking for great companies that fill a need in a sizable market. Today I’d like to tell you about a brand new company that fits all of these criteria and more. In fact, no Wall Street firms follow this stock, and I would normally just publish this recommendation in the Thursday issue, but yesterday, Forbes.com wrote the stock up, jumping it $1.45 on the opening. It slowly sold off for the rest of the day, but it is in the Top 25 of the Investor’s Business Daily Top 100, and it could have an explosive move any day now.

I’m talking about Rochester Medical Corp. (ROCM). ROCM makes urinary continence and urine drainage care products for the extended care and acute care markets. There is already great demand for these products, and ROCM is providing a superior solution. Their extended care catheters are made of silicone instead of latex to reduce allergic reactions. Their acute care Foley catheters include the Release-NF product that features an antibacterial-emitting technology to dramatically reduce urinary tract infections in hospitalized patients. No allergic reactions and no infections mean a much more pleasant time in the hospital for the patient, and it also allows doctors to focus on more serious ailments.

The unlikely founder of ROCM was an IBM software engineer whose brother ran a urology device company and knew what new products were needed. But even after their drug-coated catheter was approved by the FDA in 1998, they had very few domestic sales. After a while ROCM realized that they were being shut out by the major medical device distributors who were participating in anti-competitive practices. Without access to a group purchasing contract, Rochester Medical was blocked from 80% of the U.S. market, so they filed antitrust suits against Novation and Premier Medical Solutions, the two largest distributors to hospitals. Novation distributes catheters from C. R. Bard, the largest supplier, and Premier distributes from both Bard and Tyco, the #2 player.

Until the suits could make their way through the legal system, ROCM turned their attention to the UK market, as well as making private label products, to generate sales. The antitrust suits ground along, and late last year ROCM settled with Bard for $49 million and with Premier for $8.8 million. The case against Novation and Tyco continues, with a trial set for May 2007. I expect both companies to settle before then — perhaps in the next 60 days.

Backing out the settlements, which give the stock an unrealistic price/earnings ratio of less than 8X, I think ROCM can earn around 50 cents a share this year. But this number could be much higher, because Premier will start distributing Rochester catheters to U.S. hospitals, and the Release-NF meets a compelling medical need.

Things are finally falling in ROCM’s favor and as the last of the lawsuits come to a close the company could have another breakout day very soon — especially if they announce a settlement with Novation and/or Tyco — and I want you to have a position before that happens. Also, ROCM will be reporting March second-quarter earnings around April 18, and they should give a very positive outlook for U.S. hospital sales for the rest of the year. That would move the stock, too. I want you to buy ROCM under $23 for a $40 target by the end of this year. I’ll have a lot more detail on this interesting company in this week’s Radar Report.