You don't need the investing acumen of Warren Buffett or the riches of a trust fund baby to achieve financial success.
Since the stock market is your best hope for realizing your 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 stocks 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, an earnings surprise of 15% or more in the previous quarter, and forecasts for long-term earnings growth potential of at least 15%. We'll filter our findings through the collective investing wisdom of the 165,000 members in our Motley Fool CAPS community. If the best and brightest CAPS players think these stocks hold potential, we ought to take notice, too.
Here are some of the stocks this simple screen found:
|
Company
|
Market Cap
|
EPS Surprise
|
Avg. Analyst 5-Yr EPS Est.
|
CAPS Rating
|
|
DragonWave (Nasdaq: DRWI )
|
$224 million
|
$0.27 vs. $0.23
|
20%
|
*****
|
|
DryShips (Nasdaq: DRYS )
|
$1.3 billion
|
$0.30 vs. $0.22
|
18%
|
***
|
|
TriQuint Semiconductor (Nasdaq: TQNT )
|
$1.4 billion
|
$0.20 vs. $0.15
|
18%
|
*****
|
Sources: Yahoo! Finance and Motley Fool CAPS.
Of course, this is not a list of stocks to buy -- just a starting point for more research. We need to look more closely at these companies to see whether analysts' faith in them is well-founded. Still, since the CAPS community's helping us out, their favorite selections might be a good place to begin.
An alternative opportunity
With the 4G network rollout under way and Sprint Nextel (NYSE: S ) unveiling the HTC Evo, microwave backhaul shops DragonWave and Ceragon Networks (Nasdaq: CRNT ) ought to get cooking on growth. However, the possibility that DragonWave's revenues will rapidly decrease from major customer Clearwire -- the percentage of revenues it contributes typically runs around 80% of the total -- means results might be lumpier.
But it could mean there's something big in store, which CAPS member tooeleimigrant says will require successfully bidding on some network buildouts:
Small player in the back-haul wireless market with disconcerting reliance on Clearwire and the maturing Sprint network buildout; still Company has a strong cash position and a market capitalization with room for a material drop in sales turnover and profitability as is likely for the short-to-mid term; opportunity for significant upside if the Company can successfully bid on the network build-outs of additional carriers.
Running on fumes
Was the ecological impact of BP's Gulf oil spill exaggerated, as Time magazine recently asked? President Obama and news commentators have claimed of the spill was orders of magnitude the worst ecological disaster we've faced, yet the devastation has turned out to be far less than originally feared. Hey, no good can come out of dumping millions of gallons of oil into the ocean, but nature seems to be far more resilient than previously believed.
Even DryShip's CEO George Economou has suggested the spill will ultimately be a net plus for his drillships, though a number of his pronouncements have left analysts incredulous at times. Investors might be skeptical of whether DryShips can outmaneuver Navios Maritime (NYSE: NM ) or Paragon Shipping (Nasdaq: PRGN ) , even though it seems the Baltic Dry Index has apparently bottomed.
Yet it would seem the vast majority of CAPS members rating DryShips would agree with pniz when he asks: Really, can things get worse for DryShips? Well, there is always bankruptcy, but flottemesch says the BDI will eventually go on to rebound again and that will wash over DryShips.
Slimming down
Chipmaker TriQuint Semiconductor specifically targets the wireless handset market, focusing on cross-frequency integrated products. The trend toward smartphones is moving business TriQuint's way and revenues jumped 23% this quarter, thanks to the popularity of the iPhone. That's exactly the reason bdescent is looking for more growth here:
Well positioned to capitalize off of the Apple frenzy and other high end users of their products.
Foolish conclusion
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!
Sprint Nextel is a Motley Fool Inside Value selection. Apple is a Motley Fool Stock Advisor recommendation. Ceragon Networks is a Motley Fool Hidden Gems selection. Try any of our Foolish newsletter services today, free for 30 days.
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