Can You Amass a Fortune With These Stocks?

You don't need the investing acumen of Warren Buffett or the riches of a trust-fund baby to achieve financial success.

Small sums of money invested monthly in undervalued small-cap stocks offer hope for your greatest returns, because the big investors mostly ignore them.

Below, we screened for stocks less than $3 billion in market cap, offering earnings surprises of 15% or more in the previous quarter, with long-term earnings growth forecast to be at least 15%. We'll then filter our findings through the collective investing wisdom of the 170,000 members in our Motley Fool CAPS community.

Here are some of the stocks this simple screen found:

Company

Market Cap

EPS Act. vs. Est.

Avg. Analyst 5-Yr EPS Est.

CAPS Rating

Affymax (Nasdaq: AFFY  )

$151 million

($0.46) vs. ($0.54)

30%

**

Anadigics (Nasdaq: ANAD  )

$213 million

$0.07 vs. $0.06

18%

****

Trina Solar (NYSE: TSL  )

$2.0 billion

$1.87 vs. $1.09

17%

**

Source: 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.

An alternative opportunity
There's obviously a lot riding on Affymax getting its investigational anemia drug Hematide approved, but thus far, the path has been anything but smooth. Last year, a late-stage clinical study showed a higher rate of death and stroke in patients, and investors were disappointed that the company seemingly delayed submitting the drug to the FDA until the second quarter of 2011. With Affymax garnering lower revenue from partner Takeda, the biotech is still reporting losses, albeit narrower ones.

Now that the second quarter is upon it, Affymax is preparing for the NDA filing, in addition to priming for pre-approval inspections, getting ready for a potential FDA advisory committee review, and initiating a Phase 3b program. Affymax might not be standing still, but the hill it's climbing remains steep.

Amgen (Nasdaq: AMGN  ) commands the stage with its Epogen therapy, but plenty of upstarts like Rockwell Medical Technology are also looking to wedge their way in.

CAPS member kenqc thinks Affymax has the financial wherewithal to make it to the big leagues, and Wall Street seemingly backs that view. All nine analysts following the biotech believe it will outperform the market indexes.

Add your opinion on the Affymax CAPS page, and see whether it will achieve its primary endpoints.

A bend in the road
Disagreements between executives and boards of directors about a company's direction are not uncommon, but they typically don't result in the CEO bolting for the door, unannounced. More than a week ago, the CEO of chipmaker Anadigics resigned without explanation, causing turmoil for a stock already weighed down by forecasts of falling revenues. In an interview with EETimes, former CEO Mario Rivas hints that the company's board is just not ready for prime time. It seems they didn't want to keep investing in future growth.

Anadigics should be riding high on the momentum that mobile computing and communications are creating. As a supplier of integrated circuits for wireless, broadband, and cable, the expansion of 3G and 4G wireless networks should be a boon to the tech company. But softness in China has created an excess of inventory for Anadigics. Apparently, Rivas wanted to invest in new products, but the board preferred a more conservative route of working off inventory already on hand before committing to anything new.

Analysts think its biggest customer, Research In Motion (Nasdaq: RIMM  ) , might be looking for a change. Accounting for more than a quarter of Anadigics' revenues, a sudden departure could be as disruptive as the CEO's exit.

Stadthund is looking for industry trends to keep Anadigics moving forward, but the overhang created by the CEO and the senior VP will take a while to get past. Add Anadigics to your watchlist, then head over to the Anadigics CAPS page and give us your thoughts on what the turmoil portends.

Man the ramparts
Some analysts have grown concerned that overcapacity among solar players will cause problems down the road. While First Solar (Nasdaq: FSLR  ) , LDK Solar (NYSE: LDK  ) , and Trina Solar all got a bounce from the nuclear situation unfolding in Japan, industry structural problems might actually set them back.

At least one analyst is now saying that maybe things aren't as bad as they seemed. Lower selling prices for things like cells, panels, and modules will actually clear out excess inventory, and demand will solidify further out. Of course, not everyone's sold on the idea.

CAPS member mountaincouger says the real determining factor is China, which is the engine driving the solar vehicle:

China dominates the solar industry. As long as they can make solar panels cheaper and have their own healthy domestic growth of their own I do not see a major decline coming. Even if China's bubble bursts, they have no advantage to become more dependent on oil from foreign countries, I think we will see more moves by China in the future to move toward green energy for national security reasons.

Let us know in the comments section below or on the Trina Solar CAPS page whether the solar shop will be one to break through the clouds overhanging the industry.

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!

First Solar is a Motley Fool Rule Breakers pick. 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 does not have a financial interest 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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