The Way to Prosperity

The Oracle of Omaha, Warren Buffett, turned an initial bankroll of $10,000 into a multibillion-dollar conglomerate. Shelby Davis began with $50,000, and he amassed a $900 million fortune. These inspiring stories give us all hope that we'll be able to achieve our own financial dreams. But what if you don't have $50,000, or $10,000, or even $5,000 to get started?

Fear not, Fool -- you aren't doomed to penury and misery. You don't need a trust fund as big as Trouble's to start securing your financial future. Just follow these four simple steps:

Start today!

• Invest regularly. Every month, put away $250, $100, even $50.
• Look to the stock market for your best hope of realizing your dreams.
• Seek undervalued small-cap stocks for your greatest returns.

Why small caps?
Small caps offer the greatest potential for market-beating returns. Institutions tend to ignore these tiny stocks, and analysts don't cover them. By the time anyone realizes they're there, they've already grown and appreciated in price. To find these future giants, we'll screen for stocks with:

• Market values less than $2.5 billion, to qualify as a small cap
• Share prices above $5, to weed out penny stocks
• An earnings surprise of 20% or more last quarter
• The prospect of growing earnings at least 20% annually for the next five years, according to analysts.

We'll filter our findings through the collective investing wisdom of the more than 95,000 professional and novice investors in our Motley Fool CAPS community. If the best and brightest CAPS players think these stocks hold potential, then we ought to take notice, too.

Here are some of the stocks this simple screen found:

Of course, this is not a list of stocks to buy. This is a starting point for more research. We need to look more closely at these companies to see if analysts' faith in them is well-founded, but we've got the CAPS community helping us here, and starting with their favorites would be a good place to begin.

Shoring up revenues
Fabless semiconductor maker Spreadtrum has the potential to dial up big profits if the wireless market in China rings in the growth that everyone seems to be anticipating. It designs chips used for cellular communications standards such as GRPS, GSM, and for the upcoming 3G phones. The prospects look even more robust if more manufacturing moves overseas and if the Chinese government continues to heavily subsidize its TD-SCDMA standard. China Mobile (NYSE: CHL), for example, will be launching its TD-SCDMA handsets by giving away 20,000 to select customers.

Although the home-grown standard has been beset by problems, CAPS investors like Budsworth feel the Chinese government may end up "protecting their own," particularly if it means overall success for something it has put its stamp of approval on.

I believe over the next two years this stock will bring in some nice returns. Way under priced, great deal in this sector. With the expansion of 3G in China creating a large ever expanding market. Reorganization of management should breath some new energy into this company; one of China's largest chipset designers and manufacturers. The Chinese government has a way of protecting their own. The competition (Mediatek) might bruise them a little, but there is plenty of room for two successful players in this game. May be a bit of speculation on my part, but I believe it will pan out and show some nice returns.

Foolish final thoughts
Academics will tell you that individual investors have little chance of beating the stock market. They say the Warren Buffetts, Shelby Davises, and Peter Lynches are the exceptions to the rule. We at The Motley Fool don't agree. Stock investing isn't brain surgery. Finding good, undervalued companies is not as difficult as the professionals want you to think.

It is possible to make a more comfortable retirement for yourself, even if you have little money to start with or are starting late in life. It is possible to turn $100 into $1 million. You just have to commit: Do it now, and do it regularly. No amount is too small. Let's get started. There's no time to lose!