Amass Your Fortune With These Top Stocks

Achieving financial success doesn't require you to have the investing acumen of Warren Buffett, and you don't need  the resources of a trust fund baby to get started securing your financial future now.

Since the stock market is our best hope for realizing our dreams, start investing today by putting away small sums of money every month. Then seek out undervalued small-cap stocks for your greatest returns. I like these because they offer opportunities for growth, while still being mostly overlooked by the big investors.

To find these future giants, we'll screen for stocks with market values less than $3 billion, that had earnings surprises of 15% or more last quarter, and that are forecast to have long-term earnings growth potential of at least 15%. We'll filter our findings through the collective investing wisdom of the 160,000 members 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

EPS Surprise

Average Analyst 5-Yr
EPS Estimate

CAPS Rating
(out of 5)

Kulicke and Soffa
(Nasdaq: KLIC  )

$587 million

$0.21 vs. $0.13

24%

***

SciClone Pharmaceuticals
(Nasdaq: SCLN  )

$195 million

$0.05 vs. $0.02

20%

***

TeleCommunication Systems
(Nasdaq: TSYS  )

$421 million

$0.20 vs. $0.06

16%

*

Source: Yahoo.com and Motley Fool CAPS.

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 move.

An alternative opportunity
How many quarters of superior outperformance does it take to make a believer out of skeptics? Semiconductor assembly equipment maker Kulicke and Soffa notched its third straight quarter of monster returns, and forecast that third-quarter revenues would also handily beat expectations because customer demand for its ball and wedge bonders was at "unprecedented" levels.

We've had indications for a while that the tech sector was on fire, but as Intel (Nasdaq: INTC  ) and Microsoft (Nasdaq: MSFT  ) posted earnings reports that blew away estimates, some have concluded that maybe the sector's in danger of overheating. Fairchild Semiconductor (NYSE: FCS  ) saw its stock fall when it only beat expectations by a little.

CAPS member gshah12035 says Kulicke  and Soffa is working 'round the clock to beat the street, while Manutius says the industry's cycle has turned in its favor in a big way: "Cyclic. Preannounced big earnings beat, upward guidance through 2010. Target at least $10. This train is leaving the station."

Basking in luxury
Also caught up in a whirlwind is SciClone Pharmaceuticals, but it's not a tailwind the biopharmaceutical has caught. Midstage studies on drug chemotherapy side-effect treatment underwhelmed the market as they didn't present a statistically significant change. Although the stock has given back some recent gains, this might represent a good opportunity to get in.

SciClone's revenues come primarily from its drug Zadaxin, which it sells in China and other countries, helping to contribute to an 18% increase in fourth-quarter revenues. This continues to hold promises of future growth, as it's being used to enhance swine flu vaccines from Novartis (NYSE: NVS  ) . While the biopharma may have preferred seeing some statistical significance in its tests, the trials were not designed as such. Rather, analysts say they were trying to demonstrate proof-of-concept guides for larger trials. There's still something we may see grow from this yet. 

Highly rated CAPS All-Star zzlangerhans remains unconvinced, thinking SciClone's pipeline leaves something to be desired:

SciClone has shown respectable growth in sales of their only marketed drug, Zadaxin for hepatitis B. But over the last three years their pipeline hasn't shown much success. Zadaxin failed a phase III trial for hepatitis C, and a proposed phase III trial in melanoma doesn't seem to have gotten off the ground. Recent phase II data for SCV-07 in oral mucositis was unimpressive, which doesn't exactly build raging optimism for upcoming phase II data in hepatitis C.

When you’re all thumbs
It's pretty impressive that Twitter handles about 1 billion SMS messages per month and sees that number is growing. It just announced it was buying Cloudhopper to help it handle the influx by connecting directly to mobile carrier networks anywhere in the world.

But going unseen by the millions who are sending out their 140-character tweets is the technology of TeleCommunication Systems, which is running on the networks of wireless carriers and helping to power nearly 700 billion text messages in 2009.


CAPS All-Star leaderoftheback isn't concerned about TeleCom's lumpy results, saying that's the nature of the beast as a government contractor:

Earnings are not consistent and don't follow the same line as sales. That's a concern, but any company in bed with government tends to look a little less smooth. This could be a good entry point for a 5 year buy and hold. hmmmm

Foolish final thoughts
Stock investing is not brain surgery. Finding good, undervalued companies is not as difficult as the professionals want you to think. You just have to commit to starting now, and do so regularly. Now's the time to begin!

Intel and Microsoft are Motley Fool Inside Value recommendations. Novartis AG is a Motley Fool Global Gains pick. The Fool has created a covered strangle position on Intel. Motley Fool Options has recommended a buy calls position on Intel and a diagonal call position on Microsoft. 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.


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