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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-Year EPS Est.

CAPS Rating (out of 5)

Kulicke & Soffa Industries (Nasdaq: KLIC  )

$424 million

$0.65 vs. $0.53

16%

***

Nanometrics (Nasdaq: NANO  )

$303 million

$0.51 vs. $0.27

20%

****

SciClone Pharmaceuticals (Nasdaq: SCLN  )

$119 million

$0.11 vs. $0.08

20%

**

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
Semiconductor assembly equipment maker Kulicke & Soffa Industries is getting dismissed by the market. Despite blowing past analyst estimates on earnings and revenues, and enjoying an initial 12% burst in its stock, shares have fallen 25% from that high.

Kulicke saw a 50% increase in its business in the quarter as customer demand soared, resulting in a 325% increase in sales and a rising market share. Business over the next two quarters looks to be strong, too. What the market seems to be worried about -- aside possibly from lower returns compared to Lam Research (Nasdaq: LRCX  ) -- is Kulicke's ability to maintain that torrid growth rate next year as the semiconductor inventory cycle is seen as winding down. Even chipmakers like Intel (Nasdaq: INTC  ) and computer maker Hewlett-Packard (NYSE: HPQ  ) have been weighed down in recent days as increased inventories make the possibility of increased orders unlikely.

That's not a particular concern to CAPS members; 93% of those rating the equipment specialist believe it will outperform the broad market averages. CAPS investor dabai says given its anticipated growth rates, Kulicke & Soffa is cheap: "Sales and per share growth excellent and multiple is low for projected growth."

Reporting the day after Kulicke, it's interesting that Nanometrics -- a maker of control metrology systems used by semiconductor, LED, data storage and solar photovoltaic manufacturers -- hasn't suffered from the same market angst. It also reported a big sequential and year-over-year improvement in results, but analysts have ratcheted up their expectations for future growth.

Indeed, CAPS member Jonock is looking for higher sales to chip companies to improve Nanometrics' bottom line further, and considering Wall Street's long-term growth expectations, the equipment maker is largely undervalued by the market at its current price. You can chip in on the Nanometrics CAPS page on whether you think the semiconductor cycle will ultimately power down the company's growth.

I'll drink to that
It wasn't just revenues, profits, or even growth potential that sunk SciClone Pharmaceuticals. Along with Merck (NYSE: MRK  ) , the biotech reported that it is under investigation from the Justice Department and the SEC for allegedly violating anti-bribery laws. Its stock has lost 30% of its value since the news broke.

Gaining access to foreign markets has become a challenge for drugmakers, whose borders with international companies are not as porous as those in the U.S., and enticements to keep or gain access run afoul of our laws. Of course, SciClone has said it will cooperate with both agencies, but as if on cue, the trial lawyers have already moved in for the attack.

Although sales of its hepatitis treatment Zadaxin fell 6% in the quarter, that was more a product of the huge demand for it at the height of the swine-flu hysteria. Zadaxin sales continue to be a growth market in China -- so long as that's not where SciClone's accused of running roughshod over the anti-bribery law.

CAPS All-Star allstarvulture isn't quite so concerned about the probe, because he sees it as more of an industrywide examination as opposed to focused solely on SciClone.

But, bear in mind that the above mentioned probe is actually part of an industrywide investigation. For example, Merck & Co. also announced that they had received inquiry letters. Bristol-Myers and Astra Zeneca had previously recieved such letters. This doesn't mean that SCLN didn't engage in hanky-panky. But it opens up the possibility that they are merely a smaller fish caught in the net.

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!

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Intel is a Motley Fool Inside Value pick. Ford is a Motley Fool Stock Advisor recommendation. The Fool owns shares of and has written puts on Intel. Motley Fool Options has recommended buying calls on Intel. 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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Related Tickers

5/25/2012 4:00 PM
MRK $37.55 Down -0.05 -0.13%
Merck & Co., Inc. CAPS Rating: ****
NANO $14.73 Down -0.07 -0.47%
Nanometrics, Inc. CAPS Rating: **
SCLN $5.77 Down -0.11 -1.87%
SCICLONE PHARMACEU… CAPS Rating: ***
LRCX $38.37 Up +0.74 +1.97%
Lam Research Corp CAPS Rating: ****
HPQ $22.33 Up +0.56 +2.57%
Hewlett-Packard Co… CAPS Rating: ***
INTC $25.74 Up +0.09 +0.35%
Intel Corp CAPS Rating: *****
KLIC $10.82 Up +0.05 +0.46%
Kulicke and Soffa… CAPS Rating: ****

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