The Path 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 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 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, according to analysts, for the next five years.

We'll filter our findings through the collective investing wisdom of the 100,000-plus 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:

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 here and starting with their favorites would be a good place to begin.

Broadband to the max
NAND flash memory is used in many consumer electronic devices today -- MP3 players, digital cameras, USB drives, and mobile phones, to name a few. Demand isn't going away either.

For example, Toshiba reported near the end of last year that it had run out of such memory and had to turn business away. The company was sold out until December, it said. Ironically, supplies are now high. If reports are right, Google's (Nasdaq: GOOG) rumored decision to start using solid-state drives in its servers could end up leading to a NAND shortage. That could be a boon for flash makers such as Silicon Motion.

Top-rated CAPS All-Star bobbyabull sees the fabless chip maker as worth nearly twice as much as it's currently trading at.

[I]t's a very well managed small cap tech company worth $30 per share. [There] is no good reason to short this stock and shorts will probably give up the ghost soon here. Current p/e of 8 is way too low; great margins and ROE; great balance sheet; fabless business model's a winner; recently beat the street. Stock buyback also in place - announced early in March.

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!