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:

  1. Start today!
  2. Invest regularly. Every month, put away $250, $100, even $50.
  3. Look to the stock market for your best hope of realizing your dreams.
  4. 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 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 $3 billion, to qualify as a small cap (but no micro caps).
  • Earnings surprise of 20% or more last 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:

Company

Market Cap

Share Price

EPS Surprise

Median Analyst 5-Year EPS Est.

CAPS Rating (out of 5)

Cenveo (NYSE:CVO)

$382.8 million

$7.01

600%

20%

*****

Jinpan International (NYSE:JST)

$250.5 million

$31.25

65%

20%

*****

Pinnacle Airlines (NASDAQ:PNCL)

$123.1 million

$6.71

95%

20%

***

Silicon Motion Technology (NASDAQ:SIMO)

$110.9 million

$4.00

160%

25%

****

STEC (NASDAQ:STEC)

$1.5 billion

$29.67

24%

50%

**

Source: Yahoo! Finance.

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.

Not getting a charge
Many investors were put off when Jinpan International reduced its revenue guidance for 2009 and thus pulled the plug on its stock. The cast resin transformer maker cut its forecast by about 15% from what it gave in the first quarter (though it reiterated its profit estimates), causing its share to fall 12% when the news was announced. While Jinpan's stock has recovered from the worst of the shock, I think it can go on to even better performance in the months ahead.

Its transformers are used in the construction and infrastructure industries, and a lot of its growth projections have been based on the stimulus programs world governments have initiated. Where the U.S. recovery has been sluggish, China has seen its efforts paying off. Across a number of metrics, that country's manufacturing base has been electrified, with valued-added industrial output -- a closely watched measure of growth -- expanding 12.3% in August, the fourth month in a row it registered gains.

Equally important from Jinpan's perspective is the growth in electricity output, which jumped 9.3% last month, its fastest growth in more than a year. Transformers are needed to step up and step down voltages during the transmission of electricity. As China continues to modernize its cities, it will need to draw ever-greater amounts of electricity. Jinpan focuses on the mid-level market with medium-sized step-down transformers, in contrast to Siemens (NYSE:SI), which unveiled the world's largest cast resin transformer two years ago. Jinpan also considers ABB (NYSE:ABB) a key competitor in this market.

While Jinpan is increasing its presence in Europe and the U.S., it still derives the vast bulk of its revenues from China, and with that country's economic activity continuing to grow, Jinpan should get a charge out of the effort.

Highly rated CAPS All-Star member mrindependent agrees, and at the end of August pointed to its low valuation as a sign that there's still plenty of opportunity to make gains:

After its stock price was pummelled due to reduced guidance, Jinpan International Limited is available for less than 10 times estimated earnings and less than 2 times book value. The company is a provider of cast resin transformers and voltage distribution equipment in China. It is a rapid growth company with a clean balance sheet. Profitability is consistent and returns on equity are usually in the 15 to 20% range. Seems like a deal. I am bolstered by its Caps rating of 5 and Stock Scouter rating of 9.

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!

ABB is a Motley Fool Global Gains pick. Jinpan International is a Motley Fool Hidden Gems recommendation. Try any of our Foolish newsletter services today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.