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 a small cap
  • Share prices above $5, to weed out penny stocks
  • An earnings surprise of 15% 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 105,000 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:


Market Cap

Share Price

Earnings Surprise

5-Year Growth Estimate

CAPS Rating
(out of 5)

L-1 Identity Solutions (NYSE:ID)

$1.2 billion





Noah Education (NYSE:NED)

$290 million





Cynosure (NASDAQ:CYNO)

$317 million






$1.2 billion





VanceInfo Technologies (NYSE:VIT)

$371 million





Screen results courtesy of MSN MoneyCentral; data courtesy of Reuters; CAPS ratings courtesy of 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, but we've got the CAPS community helping us here, and starting with their favorites would be a good place to begin.

Recognizing names and faces
Many underage teens have no problem scoring fake IDs to get into bars. Gaining access to secure facilities, financial records, and even across international borders has seemingly been just as easy, and the tragedy of the Sept. 11 terrorist attacks shows that knowing who's who is a top priority for our security. As a result, numerous efforts across all levels of government, as well as in various institutions and businesses, have been implemented to secure our facilities, our borders, and our records.

L-1 Identity Solutions has made the process of obtaining fake IDs far more difficult. Through secure credentials, as well as advanced biometric identity technologies, the government and our financial institutions are introducing increasing levels of security to prevent theft, terrorism, and general havoc. And the need is not diminishing, but rather expanding, which investors like CAPS player SculptorPaul finds enticing for L-1 Identity:

L-1 is poised to be the premier manufacturer of identity solutions for protection and security within the U.S. and Europe. Their product line is the most advanced and should lead to substantial profit increases once all subsidiaries have had their synergies optimized. L-1 would also be a prime take over candidate once the market uncertainties of the financial crisis have subsided.

Consulting firm Frost & Sullivan predicts that for global financial services alone, the biometrics market should grow from $117 million in 2006 to more than $2.1 billion in 2013. That should present L-1 with opportunities to identify its next target.

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 disagree. 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!