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. They offer the best growth opportunities for growth because the big investors mostly ignore them.

Below, we screen for stocks with less than a $3 billion market cap and that offered earnings surprises of 15% or more in the previous quarter, with long-term earnings growth forecasted 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 Actual vs. Estimated

Average Analyst 5-Year EPS Estimate

CAPS Rating (out of 5)

Amtech Systems (Nasdaq: ASYS  )

$192 million

51%

35%

***

iRobot (Nasdaq: IRBT  )

$1.0 billion

17%

24%

***

OCZ Technology (Nasdaq: OCZ  )

$496 million

200%

18%

*

Sources: 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.

An alternative opportunity
Does China's decision to cut back spending on seven "strategic industries" imperil solar shops such as Amtech Systems? A Reuters story the other day focused more on high-speed rail and wind power, suggesting that the impact on solar might be minimal. But there was mention made of cutting "energy-saving and environmentally friendly technologies," too, which could be code for solar. Almost two-thirds of Amtech's 2010 revenues came from sales to China.

Solar companies such as JA Solar (Nasdaq: JASO  ) are reeling from weaker pricing power. Solar analyst Gordon Johnson at Axciom Capital recently sent out a memo pointing to JA's revising risk factors that suggest it could be hurt by falling prices because it's entered into long-term supply agreements with polysilicon and silicon wafer suppliers. First Solar has previously been identified as a company that won't be able to maintain its premium pricing structure.

CAPS member cptsintl finds Amtech's record of growth sufficient to believe it will be able to continue the march higher. With 97% of the 308 CAPS members rating the solar-tech company believing it will outperform the market indexes, it's likely they'd be in agreement on that point, too.

Add Amtech to your watchlist, but also head over to the Amtech Systems CAPS page and tell us whether you think it still has a bright future.

Sucking up some money
You're probably most familiar with iRobot because of its Roomba robotic vacuum cleaner, but as my Foolish colleague Dan Radovsky makes clear, government contracts for surveillance and bomb detection are a large and growing part of its future. More than 4,000 robots have been delivered to military and civil defense forces worldwide over the past 10 years, and the company just announced a $14 million contract with the Navy SEALs.

But government contracts are a fickle business, so the consumer division, which comprises the large majority of its revenues, might just offer the most interesting growth opportunities. Developing an open-source architecture, as Dan wrote about, would allow developers to come up with applications and could expand iRobot's reach beyond what's conceivable today. It's already compatible with the operating systems of both Apple (Nasdaq: AAPL  ) and Google (Nasdaq: GOOG  ) , while the Ava interface would allow it to be platform-agnostic.

Considering we're engaged in six hotspots around the world at the moment, CAPS member Futurenhldad still believes the government angle gives iRobot an immediate growth platform: "Lots and Lots of Government Money and [it's] better to have a robot shot at [than] a soldier."

Add iRobot to the Fool's free portfolio tracker to see whether it can automatically and effortlessly grow its base.

Storing some gains
Once again, the decision by OCZ Technology to abandon the DRAM market looks smarter by the quarter. Analysts had expected the memory-chip maker to record a $0.01-per-share loss, but it was able to turn in a profit of $0.01 while beating revenue estimates to boot.

Shares of rival drive maker Western Digital are also scaling higher as hopes for improved conditions led analysts to upgrade the stock. Seagate Technology (NYSE: STX  ) is similarly higher after the upgrade.

In May, CAPS member Thomas2222 envisioned OCZ's excellent earnings report, noting the advancements it was making.

OCZ has consistently been the first to market with the emerging SSD technology. OCZ has doubled manufacturing twice this last year and still cannot meet demand. As long as [CEO Ryan Petersen] continues to press OCZ's lead in SSD technology, I think the company [will] stay at or near the front of the pack of this market. Recent capital investments indicate OCZ will continue pressing R&D.

The brand is now known among hobbyists as the best SSD manufacturer, giving credence [to the] buzz about their products.

Drive over to the OCZ Technology CAPS page and tell us whether you think this will continue to be a solid investment.

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 Motley Fool owns shares of Apple, Google, and Western Digital. Motley Fool newsletter services have recommended buying shares of Apple, First Solar, Google, and iRobot and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Rich Duprey has no financial interest in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.


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