Recs

6

Amass Your Fortune With These Stocks

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

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 170,000 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 Act. vs. Est.

Avg. Analyst 5-Year EPS Est.

CAPS Rating
(out of 5)

Cepheid (Nasdaq: CPHD  ) $1.4 billion ($0.02) vs. ($0.06) 20% **
Powerwave Technologies (Nasdaq: PWAV  ) $437 million $0.06 vs. $0.04 125% ***
Westport Innovations (Nasdaq: WPRT  ) $741 million ($0.16) vs. ($0.21) 30% *****

Source: Yahoo.com 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
The possible resurgence of the H1N1 virus , aka swine flu, and the recent delivery of suspicious packages to government offices should highlight the opportunities presenting themselves to Cepheid, the maker of the Xpert testing system. The GeneXpert system is used by the U.S. Postal Service to screen for biohazards and by hospitals to test for diseases, while its Xpert Flu system just got approved in Europe to test for swine flu.

If H1N1 heats up again, look for other vaccine players like Novavax (Nasdaq: NVAX  ) and BioCryst Pharmaceuticals (Nasdaq: BCRX  ) to rise as well. While shares of Cepheid have risen more than 60% over the past year, analysts are expecting profits to triple next year on 22% annual growth in sales over the next two years.

With 91% of CAPS members who rated the molecular diagnostics company tagging it to beat the market, it seems they believe the need for its testing systems won't catch the flu anytime soon. You can tell us on the Cepheid CAPS page whether you believe the stock is inoculated against a setback.

Making a connection
If Nokia Siemens Networks gets Chinese permission to finalize the purchase of the infrastructure business Motorola Solutions, it will have a broader footprint in both LTE and WiMAX through Clearwire (and you thought WiMAX was dead).

That should allow network solutions provider Powerwave Technologies to sell more of its wireless equipment, since Nokia Siemens accounts for a quarter of its revenues. Of course, Nokia and Siemens may dissolve their joint venture, so Powerwave could find itself odd man out.

CAPS member daddycswhite doesn't see it that way, expecting Powerwave to find an attractive bidder for its business:

Liftoff has already started. This is the last of the big three in it's field to remain solo - both others were bought out. It'll pay off either through solo success or eventual buyout.

You can connect with what's happening by adding Powerwave to your watchlist, then heading over to the Powerwave Technologies CAPS page and letting us know what the 4G revolution means to it.

Man the ramparts
Some people might assume there will be a technological breakthrough that will sever our dependence on oil to power our cars, but more than likely there will be a gradual transition using technology produced by the likes of Westport Innovations and Fuel Systems Solutions (Nasdaq: FSYS  ) .

Westport has a joint venture with engine maker Cummins (NYSE: CMI  ) to develop high-performance, fuel-efficient internal combustion engines that run on natural gas, biomethane, and hydrogen.

A few years ago I picked Westport on CAPS to outperform the broad market averages because I assumed the technology would be a key component in our ability to move to alternative fuels, and it's since become my top-performing pick. With BP shutting down the Alaska pipeline that provides 15% of our domestic supply of oil because of a leak over the weekend, oil prices are renewing their assault on $100 a barrel. That means carmakers like Ford will have invigorated incentive to double their research efforts with Westport and allow the technology to expand further. I have no plans to close out my CAPS pick just yet. This one still has legs to move up higher.

You can add Westport to the Fool's free portfolio tracker to keep an eye on what other signals it's sending.

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!

The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

Enter your email address below to find out what made Jobs so enraged!

Ford is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Rich Duprey owns shares of Motorola Solutions and Motorola Mobility but does not have a financial interest in any of the other 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.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

DocumentId: 1420104, ~/Articles/ArticleHandler.aspx, 5/26/2012 5:36:54 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 8 hours ago Sponsored by:
DOW 12,454.83 -74.92 -0.60%
S&P 500 1,317.82 -2.86 -0.22%
NASD 2,837.53 -1.85 -0.07%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

5/25/2012 4:00 PM
NVAX $1.27 Up +0.02 +1.60%
Novavax, Inc. CAPS Rating: *
PWAV $0.99 Up +0.03 +3.55%
Powerwave Technolo… CAPS Rating: **
WPRT $25.64 Down -0.64 -2.44%
Westport Innovatio… CAPS Rating: *****
FSYS $15.10 Down -0.24 -1.56%
Fuel Systems Solut… CAPS Rating: ***
BCRX $3.26 Down +0.00 +0.00%
BioCryst Pharmaceu… CAPS Rating: *
CMI $98.95 Down -1.31 -1.31%
Cummins, Inc. CAPS Rating: *****
CPHD $38.47 Up +0.38 +1.00%
Cepheid CAPS Rating: ***

Advertisement