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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 under $3 billion in market cap 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

Avgerage Analyst 5-Year EPS Estimate

CAPS Rating (out of 5)

Cepheid (Nasdaq: CPHD  ) $2.0 billion 200% 20% ***
Silicon Motion Technology (Nasdaq: SIMO  ) $292 million 39% 20% *****
Take-Two Interactive (Nasdaq: TTWO  ) $1.3 billion 54% 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
If you're looking for the expert in medical diagnostics, look no further than Cepheid, the maker of the GeneXpert testing system. Sales rose 25% over the past 12 months as demand from hospitals has risen with the thaw of capital spending. Cepheid has installed more than 2,000 systems globally, with more than 800 in the U.S. since GeneXpert was launched five years ago. At least 120 systems were installed last quarter.

Shares of Cepheid have appreciated 121% in the past year, compared with Alere at 37% and Gen-Probe (Nasdaq: GPRO  ) , which rose 43%. While analysts at Goldman Sachs recently downgraded Cepheid because of valuation, it still has large potential as it expands overseas. Currently, international sales represented just 26% of total sales last quarter, but Cepheid saw a 68% jump in clinical revenues there.

Highly rated CAPS All-Star member TMFHelical thinks Cepheid will grow regardless of geography.

A big beneficiary of the explosion in genomic information. Also part of the trend in providing medical information faster and nearer to the patient. The approach of starting with infectious disease and then moving to personal genomics based tests was well considered by management.

Add Cepheid to your watchlist,and  then head over to the Cepheid CAPS page and diagnose its future.

Getting a charge out of it
The explosion of the mobile Internet is connecting smartphones, digital cameras, PCs, and tablets with Silicon Motion Technology, which makes high-performance, low-power chips for multimedia consumer-electronics products. But the PC market has not been so robust of late.

Computer shipments fell 4.2% in the quarter in the U.S., according to the market researchers at IDC, as tablet sales continue to eat into the PC's share of the market. Gartner says they PCs were down 5.6%. Apple has sold almost 20 million iPads since it first launched the tablet.

While 98% of the nearly 800 CAPS members rating Silicon Motion think it will outperform the market, all of the All-Star members weighing in believe it will beat the Street. Add Silicon Motion to the Fool's free portfolio tracker to see whether it can chip in more growth from the tablet computing's popularity.

Game over?
Video games continue to suffer their long-running malaise, as software sales fell 12% and hardware dropped 9% in June, but that's also creating opportunities. Electronic Arts (Nasdaq: ERTS  ) , for example, is spending as much as $1.3 billion to buy PopCap Games, the maker of popular games such as Bejeweled. Glu Mobile (Nasdaq: GLUU  ) got a boost as investors thought it might make a good acquisition target now, too, since it has a healthy portfolio of games for mobile platforms, such as Contract Killer.

Where mobile computing is affecting computer makers, it's boosting some segments of the gaming market. Take-Two Interactive is breaking into the mobile market, but its price point for such games might not make it much of a meaningful line of business. The smaller form factor won't necessarily translate into the broader and bigger game platforms. But the beaten-down market also makes it a potential takeover candidate of its own.

CAPS member MarkP28665 says Take-Two's upcoming creative designs will keep it going strong: "The electronic and online video gaming business is competitive but Take-Two has a series of new titles coming to market over the next year and a half. A few of these new games will probably be hits adding to the current good sellers so I think the next year will see better results."

Let us know on the Take-Two Interactive CAPS page whether you think it's still "game on."

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!

The Motley Fool owns shares of Apple and Take-Two Interactive. Motley Fool newsletter services have recommended buying shares of Take-Two Interactive, Apple, and NVIDIA, writing puts in NVIDIA, 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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Related Tickers

5/25/2012 4:00 PM
GPRO $81.19 Down -0.01 -0.01%
Gen-Probe, Inc. CAPS Rating: ***
SIMO $13.42 Up +0.16 +1.21%
Silicon Motion Tec… CAPS Rating: ****
TTWO $11.56 Up +0.05 +0.43%
Take-Two Interacti… CAPS Rating: *****
CPHD $38.47 Up +0.38 +1.00%
Cepheid CAPS Rating: ***
EA $14.22 Down +0.00 +0.00%
Electronic Arts CAPS Rating: ***
GLUU $4.72 Up +0.02 +0.43%
Glu Mobile, Inc. CAPS Rating: **

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