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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're not doomed to penury and misery. You don't need to be a trust-fund baby to start securing your financial future. Just follow these four simple steps:

Why small caps?
Because they 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 $3 billion, to qualify as a small cap (but no micro caps).
  • Earnings surprise of 20% or more last quarter.
  • Long-term earnings growth potential of at least 20%.

We'll filter our findings through the collective investing wisdom of the more than 140,000 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:

Company

Market Cap

Share Price

EPS Surprise

5-Yr Growth Est.

CAPS Rating

Chipotle Mexican Grill (NYSE: CMG)

$2.9 billion

$91.74

25%

20%

***

Coinstar (Nasdaq: CSTR)

$1.05 billion

$33.17

35%

29%

**

Fuel-Tech (Nasdaq: FTEK)

$271.7 million

$10.89

67%

15%

****

Hercules Offshore (Nasdaq: HERO)

$478.6 million

$5.01

59%

15%

****

Trina Solar (NYSE: TSL)

$815.4 million

$32.38

121%

8%

**

Source: Yahoo! Finance.

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.

Not getting a charge
A lot of the growth expectations built into solar industry were predicated on China enacting regulations by year's end to support demand. First Solar (Nasdaq: FSLR), for example, recently signed a "memorandum of understanding" to build a 2,000-megawatt solar power plant, but it needs a "feed-in tariff" to provide above-market prices for the electricity provided by the plant to be a viable project. Thus China's National Development and Planning Commission delaying the tariff for as long as two years calls into question the rosy predictions for growth in the industry --  definitively affecting First Solar, Trina Solar, and Suntech Power (NYSE: STP).

Hapoalim Securities analyst Gordon Johnson has frequently critiqued the assumptions the industry bases its forecasts on and recently said that Trina is one of a number of Chinese solar companies harboring underappreciated risks. It reported a 40% plunge in revenue last quarter, while receivables soared a stunning 45% year over year. At the same time, free cash flow is deteriorating, even as net income purportedly continues to grow.

All of that suggests very poor earnings quality. Operating margins are deteriorating (they fell from almost 13% last year to just over 9% in the most recent quarter) and finished goods in inventory soared more than 500% at the end of the last fiscal year, suggesting that the company may be stuffing the channel. Trina is apparently pushing product out the door and extending credit to customers who may ultimately not be able to pay for it if demand doesn't materialize as anticipated. Investors in Trina could get a nasty sunburn from this solar play.

Even after bestowing a low, two-star rating on the company, CAPS members remain rather bullish on the stock with 83% of the more than 1,000 members rating Trina marking it to outperform the market. Many seem to agree with SemiChamp who says the uptake of solar will allow this integrated supplier to grow. Let's just hope that demand eventually finds its way toward Trina's doorway.

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 is not 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!

“The Next Great Investment”… That’s how a top global investor describes India’s potential. On Nov. 28, The Motley Fool’s Tim Hanson returns to India to prove it. Follow along in real time and get his TOP pick first (Hanson returned from China in July with a stock that’s up 169%!). Enter email below.

Chipotle Mexican Grill, First Solar, and Suntech Power Holdings are Motley Fool Rule Breakers picks. Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 08, 2009, at 1:55 PM, lomaxlovescrocs wrote:

    Supply and demand mechanisms is an useful capitalistic tool, that is for sure. You have to understand that 7 billion people lives on Earth and there is often no way for most commodities to meet demand for all of us. One hundred years ago we have no problem with shortages unless it has to do with bad weather , diseases, or things like that. For fossil fuels, it is already a given that we will keep running into shortages or what we rather call as shocks. So pricing mechanisms based on supply and demand is losing some of its reveleance. A change of thinking or thinking outside the box is now in order. Proft is considered a tangible value, but there will be a new kiind of profit that is intangible which can be translated into "profitable savings". If a commodity keeps running into a shortage, we do not only replace it wtih something else but just add to it. That is why utilities, for instance, can no longer use the argument about presently low fossil fuels as a reason for not adopting higher priced green or alternate energy. In other words, if we delay on alternate energy, we will pay unnecessarily more for fossil fuel due to recurring shortages or shocks. In today's age, it is becoming more prudent to diversify into new sources of energy in order to stall or delay the next shortage of the ever dwindling fossil energy sources. As matter of fact, our economy is not paralyzed because of financial misgivings but more of the inevitable future oil shocks as result of continued apathiness toward increasing sources of alternate energy. Intangible values is an area that we are constantly ignoring at ever greater costs. Profits or tanglibel values is no longer the only game in town. Intangible values may not seem profitable , but they often produces great savings in the long term. This is something that is difficult if not impossible to persuade certain players to understand and base future strategies upon. We are fortunate to be able to undertake financial expedient routes around the swelling issues that will not go away anytime. I dont believe that we can keep doing it expediently for much longer.. In conclusion, we better start to learn how to invest for longer term savings , sometimes. I dont think that we can keep fooling ourselves that we have to wait for the next shock to justify returning to alternate energy for a quick buck. This is not how it is supposed to work for all of us in this area anymore. We got to stop kidding ourselves.

  • Report this Comment On October 08, 2009, at 2:12 PM, lomaxlovescrocs wrote:

    There is one issue that nags me the most about alternate energy . Alternate energy is bound to require vast swaths of real estate even including rooftops to site or house the alternate energy infrastructure. A fossil fuel fired powerplant or a nuclear plant requires much smaller footprint to generate a gigawatt a hour. it requires square miles to site either wind or solar powerplant of simiiliar equivalent. In case you are wondering, we already have 400 nuclear powerplants, tens of thousand coal powerplants, reservoir/dams, oil/ natural gas powerplants in the world, yet it serves only a fraction of the world's population. The rest of the population depends on locally made charcoal or bricks made of cowdung. The whole energy picture is so vast to picture inside anyone's head. With the global climate change looming nearer and our continued apathiness toward alternate energy, it tells me that people continue to lack any sense of urgency about preserving our Earth or our low lying population centers. Those are vast liabilities awaiting to arrive, yet we continue to be fixated on the equiblrium of supply/demand mechanisms or those tangible opporunities or so called crisis investing. This is a wrong time to look for such ill-mannered profit opporunities in the face of the looming enviromnental disruption. Doesnt anyone really understand that a mere dozen of gigawatt manufacturing capacity wont do much to stave off the disaster that is certain to come. We still havent stopped buring firewood just because we call it unsequestered carbon as opposed to coal as sequestered or soemthing like that... We have to stop using evasive arguments to justify our continued ways of living that has to be halted immediately. There is simply too many of us liviing on Earth. There is no escape pods that will take us to another habitable planet anytime soon .. Get real.. Damn the profits,,, full speed ahead!

  • Report this Comment On October 08, 2009, at 2:19 PM, lomaxlovescrocs wrote:

    Warren Buffet is not about to save our Earth if that is what you are trying to say to us... Just forget about him and get back to solving our problems through investments for greater intangible benefits for all. Profits can wait. We are not going to build Rome overnight.. Alternate energy will require decades of growth. I see no reason why we cannot tear down fossil fuel powerplants and replacing them with alternate energy if that is what is not in your mind. Something is really wrong with your thinkings.. Why is it that you are preaching such kinds of investments that will do nothing but keep us ever more miserable as time passes. What ever happens to energy independence or healthier lifestyles for all?? I dont want to give you any more of our sick, weak, and tired people..

  • Report this Comment On October 08, 2009, at 2:25 PM, lomaxlovescrocs wrote:

    I thought that being stuck in traffic to work and back home is bad enough only to find ourselves adding ever new layer of problem on it over and over again dailiy. I still do not see America solving much of our problems despite new innovations showing up daily. Our problems grew old and yet never die. Something is not right about that. , dont you agree? This present downturn is quite unbelievable, yet we are still not doing anything to stave off future predictable problems that is yet to come ahead. Is it because most of us are still so fixated on tangible profitable opporunities when we should also look at enhancing our intangible opporunities that will benefit us in the future and stave off future problems .

  • Report this Comment On October 08, 2009, at 2:33 PM, QwertyHero wrote:

    Hey - I have an idea - rather than prefacing EVERY stock you discuss with "This is not a list of stocks to buy" or "These stocks are not reccomendations" YOU ACTUALLY RECCOMEND A STOCK TO BUY!

    I mean, isn't that the POINT???

  • Report this Comment On October 09, 2009, at 7:17 PM, rfaramir wrote:

    I suspect that actual recommendations are NOT the point of these articles. They are generally useful tidbits that may educate you on certain points of investing wisdom or give insight into a sector or company or technology. In this particular article you get some of both: (a) general pointers in small cap investing and (b) insight into alternative energy and particularly solar.

    Why would you expect to get a real investment recommendation, backed by the author's public reputation for free?

    That's what the paid investor newsletters are for. And which is why they are pitched. People like you come here wanting recommendations, so Fool.com authors entice you by showing that they have some wisdom to share (by giving you some free) and hoping you purchase a newsletter subscription to really satisfy you.

    I'm personally a happy subscriber to Hidden Gems, and I read a lot of the free articles, too. By better understanding the point of these free articles you can better enjoy them (or at least read with less irritation), but if you really want to satisfy your desire for investment recommendations, buy a subscription.

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Related Tickers

11/23/2009 4:02 PM
TSL $44.60 Up +0.14 +0.31%
Trina Solar Limite… CAPS Rating: **
STP $15.52 Up +0.34 +2.24%
Suntech Power Hold… CAPS Rating: ****
CSTR $26.48 Down -0.02 -0.08%
Coinstar, Inc. CAPS Rating: **
HERO $5.15 Up +0.07 +1.38%
Hercules Offshore,… CAPS Rating: ****
FSLR $121.42 Up +0.24 +0.20%
First Solar, Inc. CAPS Rating: **
FTEK $9.82 Up +0.13 +1.34%
Fuel Tech, Inc. CAPS Rating: ****
CMG $85.14 Up +1.26 +1.50%
Chipotle Mexican G… CAPS Rating: ***

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