Build Your Fortune With These Winners

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 own 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 to be a trust-fund baby 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?
Because they offer the greatest potential for market-beating returns. Institutions tend to ignore these tiny stocks, and analysts tend not to cover them. By the time anyone realizes they're there, they've already grown and appreciated in price.

To begin looking for these future giants, we'll screen for stocks with:

• Market values less than $3 billion, to qualify as a small cap (but no micro caps)
• An earnings surprise of 20% or more in the latest quarter
• Long-term earnings growth potential of at least 20%             

We'll filter our findings through the collective investing wisdom of the more than 140,000 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, too.

Here are some of the stocks this simple screen found:

Source: Earnings.com; Zacks.

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, but we've got the CAPS community helping us, and its favorites would be a good place to begin.

A dull blade
A basic tenet of advertising is that sex sells -- heck, even Warren Buffett talks about it. But looking at the results of quirky retailer American Apparel or one of the original purveyors of advertising that pushed the envelope -- Abercrombie & Fitch (NYSE:ANF) -- shows that might not always hold true.

American Apparel reported 16% lower same-store sales for the latest quarter, while Abercrombie's monthly comps were down again, off 15% for October -- even worse than analyst's already-low expectations. American Apparel might have reported a 78% jump in profits, but that had more to do with stock compensation from a merger deal last year that makes the year-over-year comparison seem huge, rather than any operational improvements. In comparison, less "out-there" advertiser Aeropostale (NYSE:ARO) reported encouraging preliminary third-quarter results, with comps growing 10% over the year-ago period.

It's difficult to separate American Apparel from the actions of its CEO, but investors like CAPS member theansible remain intrigued by the status symbol the company's clothing has become.

Huge cult following. Always opening new stores. Profit growing. Dov Charney needs to cool it with the risky behavior but otherwise I think it's a great company.

The CAPS community would seem to agree, because 89.8% of the 283 members rating American Apparel mark it to outperform the broader indexes.

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.