The Way to Prosperity

The Oracle of Omaha, Warren Buffett, turned an initial bankroll of $10,000 into a multibillion-dollar conglomerate. Shelby Davis began with $50,000, and he amassed a $900 million fortune. These inspiring stories give us all hope that we'll be able to achieve our financial dreams. But what if you don't have $50,000, or $10,000, or even $5,000 to get started?

Fear not, Fool -- you aren't doomed to penury and misery. You don't need a trust fund as big as Trouble's to start securing your financial future. Just follow these four simple steps:

• Start today!
• Invest regularly. Every month, put away $250, $100, even $50.
• Look to the stock market for your best hope of realizing your dreams.
• Seek undervalued small-cap stocks for your greatest returns.

Why small caps?
Small caps offer the greatest potential for market-beating returns. Institutions tend to ignore these tiny stocks, and analysts don't cover them. By the time anyone realizes they're there, they've already grown and appreciated in price. To find these future giants, we'll screen for stocks with:

• Market values less than $2.5 billion, to qualify as small caps.
• Share prices above $5, to weed out penny stocks.
• An earnings surprise of 20% or more last quarter.
• The prospect of growing earnings at least 20% annually for the next five years, according to analysts.

We'll filter our findings through the collective investing wisdom of the more than 85,000 professional and novice investors in our Motley Fool CAPS community. If the best and brightest CAPS players think these stocks hold potential, then we ought to take notice.

Here are some of the stocks this simple screen found:

Of course, this is not a list of stocks to buy. This is a starting point for more research. We need to look more closely at these companies to see if analysts' faith in them is well-founded. Luckily, we've got the CAPS community helping us.

Three-point conversion
Advanced solar power, hybrid vehicle batteries, and next-generation memory devices sound like a triumvirate of futuristic technology advances. Yet an investor can get all three today in Energy Conversion Devices, which has both its thumbs (and a big toe) in each of those pies. So far that hasn't proven to be a profitable path to follow, but an earnings report showing revenue doubling and margins improving has led many to believe it's on its way to prosperity.

Solar power seems to be the play of the moment, and CAPS investor degnerc points to Energy Conversion's polysilicon-free, thin-layer panels as a reason it will vault over the competition. "Up and coming player in the Solar Power business. Its thin layered technology gives it a cost advantage vs. [its] competitors."

As top-rated All-Star odmonk notes, the pent-up demand for alternative sources of energy makes Energy Conversion a winner, but don't expect a nice, easy ride. "Increased demand for alternative energy technology [will] make this trend upward, though probably with some volatility."

Foolish final thoughts
Academics will tell you that individual investors have little chance of beating the stock market. They say the Warren Buffetts, Shelby Davises, and Peter Lynches are the exceptions to the rule. We at The Motley Fool don't agree. Stock investing is not brain surgery. Finding good, undervalued companies is not as difficult as the professionals want you to think.

It is possible to make a more comfortable retirement for yourself, even if you have little money to start with or are starting late in life. It is possible to turn $100 into $1 million. You just have to commit: Do it now, and do it regularly. No amount is too small. Let's get started. There's no time to lose!