No two ways about it, pip-squeak stocks are popping. One of the latest examples is a recent all-time high in the Russell 2000 Small Cap Index. In many cases, though, some Wall Streeters tell me, investors are foolishly chasing little more than overly touted pipe dreams, rather than legitimate higher-priced peewees with sound fundamentals and better-than-average growth prospects that have a more realistic shot at being home runs.

If you’re looking for some small fries that can wow ’em, one worthwhile source, judging from its sizzling record, could well be the just-issued “best of the best” list from Upside, a monthly Hammond, Ind.-based newsletter that tracks small and midcap stocks.

Since its inception in May 1999, Upside’s best buy list has gained 294.1%, excluding dividends and transaction costs, according to editor Richard Moroney. Over the same period, the Russell 2000 Index is up 46.2%, while the S&P 500 has declined 7.7%.

Upside’s newest best buy list, seven companies all told, ranging in price from $30.40 to $95.58, are each viewed as a potential 15% to 20% gainer – and possibly a lot more – over the next 12 to 18 months. Most are in the newsletter’s favorite sectors – insurance, oil and gas, personal and household goods, and banks.

Taking a brief look at some of the names, we kick off with casual footwear maker Timberland ($38.06). Because its boots dominate their category in America, Timberland is turning to apparel and overseas expansion to sustain growth. Recent quarterly earnings estimates had been cut to reflect higher-than-anticipated spending on new products, but the company expects double-digit profit growth to resume in the September and December quarters. Earnings are pegged at $2.49 a share this year and $2.73 in 2006. Timberland, debt-free, has more than $200 million, or roughly $3 a share in cash.

Energy beneficiary Cal Dive International ($54.54), which offers a wide range of marine-contracting services, is another peewee pick. The stock’s recent breakout to all-time highs suggests it’s attracting notice. With high oil and gas prices encouraging producers to boost capital spending, demand for Cal Dive’s services is improving. High energy prices are also boosting results. Earnings are estimated at $2.93 a share this year and $3.35 next year.

Based on its assets, IndyMac Bancorp ($43.46), another selection, is the country’s 10th-largest savings and loan with assets of $18 billion. Mr. Moroney believes a record pipeline of new loans bodes well for June quarter results due to be released shortly; further, while the narrowed gap between short- and long-term interest rates may crimp IndyMac’s net interest margin over the near term, brisk demand for mortgages should spur continued robust profit growth. Per-share earnings are pegged at $4.31 in 2005 and $4.88 in 2006.Yield is 3.5%.

Another peewee pick, the construction and materials producer Eagle Materials ($96.58) has delivered six straight quarters of double-digit growth in sales and per-share earnings, thanks to strong demand and favorable pricing. While it has benefited from the housing boom, new residential construction accounts for less than 25% of domestic sales in the wallboard and cement markets. Operating on a March fiscal year, Eagle is expected to earn $7.16 a share in 2006 and $8.26 in 2007.

Rounding out Upside’s seven best buys are Selective Insurance Group ($49.82), Maverick Tube ($30.40), and Stancorp Financial ($79.39).

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RATE RISK: Many economists see just one more Fed rate hike this year, say, a boost in the Fed Funds rate to 3.5% at the August 9 meeting of the Federal Open Market Committee from the current 3.25%. But a few economists recently in touch with some former and current Fed governors are being advised that such an outlook is unrealistic if the housing market stays hot. In the event it does, it’s suggested, a year-end rate wrap-up of 4% to 4.25% is more likely. That’s also the view of A.G. Edwards economist Patrick Fearon, who characterizes the housing market as “uncomfortably high.”

Whereas some market professionals think the Fed Funds rate could climb to 5% before year end, given a rebounding economy and the inflationary implications of nearly $60-a-barrel oil, Mr. Fearon disagrees. He thinks a 2005 close of 3.5% or a bit higher is the most likely scenario, with 4% to 4.5% the maximum. Why so? For starters, he notes the rate of economic growth is moderating: Likewise, core inflation, though up a bit, hasn’t yet climbed into dangerous territory. He further observes that the Fed, in the past, has precipitated a recession by raising rates too much. “I doubt we’ll see a repeat of that,” he said.