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 they're mostly ignored by the big investors.

Below we screen for stocks with 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 180,000 members in our Motley Fool CAPS community.

Here are some of the stocks this simple screen found:

Company

Market Cap

EPS Actual vs. Estimate

Avg. Analyst 5-Year EPS Estimate

CAPS Rating

SodaStream International (Nasdaq: SODA  ) $631 million 68% 33% **
THQ (Nasdaq: THQI  ) $113 million 17% 22% **
Zoltek (Nasdaq: ZOLT  ) $305 million 800% 15% ***

Source: Yahoo! 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.

A link to the future
There are a lot of reasons we're supposed to believe investors in SodaStream International will eventually be popping corks: It's healthier, it's greener, and its DIY soda machines are part of a growing trend. I remain unconvinced this is anything more than a bubble, the flavor of the month, if you will.

Earnings results would seem to belie that view, though. Sales rose 39% last quarter, allowing it to raise guidance for the rest of the year. With a strong retail presence in some 7,000 locations, including major retailers like Bed Bath & Beyond (Nasdaq: BBBY  ) , Target (NYSE: TGT  ) , and even office supplies retailer Staples.

Yet SodaStream is no Green Mountain Coffee Roasters (Nasdaq: GMCR  ) . It doesn't have a patented, revenue-generating, high-margin refill like the K-cup (you can use third-party carbonation canisters); there is no real cost savings like there is with a premium cup of coffee (a can of soda is already pretty cheap). So you're left with saving the environment and perhaps health concerns, two areas that seem unlikely for people to start viewing SodaStream as the means of changing their lives.

Back in March, I marked the stock to underperform the S&P 500 before it had its big run-up and subsequent bubble burst. I don't see it doing anything that will change that outlook. So add SodaStream to your watchlist then fire away in the comments section below or on the SodaStream International CAPS page.

Smart thinking
The video game industry had been a steady performer throughout much of the recession, but as it wore on and ground down consumers, even game players stopped spending their money on new titles and systems. It seems we're coming out of that dark period and now we have the best companies emerging to the fore.

Activision Blizzard (Nasdaq: ATVI  ) is breaking industry records with its new Call of Duty game, but it was raising estimates ahead of its release, and while THQ had wider losses in its third quarter, they were much better than what analysts anticipated and it's also looking forward to the all-important Christmas selling season, led by its Saints Row title, for which it expects to sell 3 million copies.

Analysts are a little circumspect about it selling 3 million copies of games that go with its uDraw GameTablet, and I have to admit after its introduction amid much fanfare, there seems limited utility with the hardware.

CAPS member hurricanehedge says if THQ doesn't return to form, investors can probably expect it to get bought out.

With the new Saints Row coming out, i think rockstar better stop worrying about cowboys and zombies and start worrying about competitors taking over their GTA market. THQ will begin to produce hit games like they did back with Tony Hawk Pro Skater. If they dont, they will get bought out by [Activision], [Electronic Arts], or my crystal ball tells me that Zynga could try and move into the actual video game indusrty, and try to do so cheaply

Add THQ to your watchlist and let us know in the comments section below whether you think the stock belongs in a balanced portfolio.

Rising fortunes
The problem with wind power is that it can only be located in certain wind-swept areas. Transmitting it to where it can actually be used makes it cost a lot, according to some calculations, making it no more cost effective than coal. Transmission lines, inverters, and back-up generators for when the wind's not blowing ... it all adds up. And that's just land-based wind power; offshore wind farms are almost as expensive as solar, the most expensive form of energy. The sun and wind apparently aren't "free" as some would have you believe.

That hasn't stopped Zoltek from profiting. Despite its largest customer Vestas cutting orders 40% recently, the carbon fiber maker -- the key ingredient for wind turbines -- reported revenue jumping 38% year over year and reversing year-ago losses. Yet Hexcel, a more consistently profitable carbon-fiber manufacturer, might be a better bet.

With 95% of CAPS members rating Zoltek to loft higher, add the stock to your watchlist to see whether it can withstand any blowback.

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!

Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Activision Blizzard. The Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Staples, Green Mountain Coffee Roasters, SodaStream International, Bed Bath & Beyond, and Activision Blizzard. Motley Fool newsletter services have recommended creating a lurking gator position in Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended creating a synthetic long position in Activision Blizzard. 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. The Motley Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 06, 2011, at 6:09 PM, a123456789 wrote:

    invest in parkervision PRKR

    invest in authenticidate ADAT

    invest in champion inc. CHMP

    small cap companies are growing and these services are needed

    nortel and washington mutual WAMUQ, NORTLQ

    remember T mobile is in then PK sheets

    i'm talking billions of dollars

    i have to tell you no other businesses have held on stronger as much as these the only two were

    wilmington trust who was bought by bb and t bank and which a profitable merger with two outstanding financial institiutions were merged by this firm and the bank bought it and FORD motor corporation sell this information i will tell you the american market will network and transmit methods of financing no on e will ever understand why a lack off functionability and consistent request of business merging for future innovation

    has found itself seeing three corporations with thses efforts make a huge bound of business happen in the upcoming years and help the hard working feasible living american.

  • Report this Comment On December 06, 2011, at 6:45 PM, Agbahizzal wrote:

    THQ will be bought out if they do not come up with another popular cash cow like UFC Undisputed and Smackdown VS Raw, they will be bought out. I doubt it will be with EA or Activision because they can just buy the game licenses without having to pick up the debt that THQ has. Saints Row 3 sucked, had no depth and looks like something upper management rushed out to sell during the holidays. Rockstar will always make money regardless what game they put out cause their philosophy on game making is all about the products quality, which makes they not have to relay on gimmicks like holidays to produce sale numbers that betray the quality of the game.

    Don't believe the hype, THQ is barely treading water, in my opinion.

  • Report this Comment On December 06, 2011, at 11:23 PM, vidar712 wrote:

    I don't remember the specifics, but I was worried about THQ's upcoming debt payments. If they don't increase revenue or refinance their debt they are headed for bankruptcy.

  • Report this Comment On December 07, 2011, at 1:17 PM, lolguidos wrote:

    THQI isn't going BK. That's just fear mongering from a short. It's market cap is 95mil and they are going to rake in nearly that this quarter alone. I can't see a reason it's trading so low.

  • Report this Comment On December 07, 2011, at 1:29 PM, lastone51 wrote:

    Why would a person want to use third party carbonation canisters? Does a person save money when they use a third party's carbonation canister? What about the syrups and the bottles? Do you go third party on those also?

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