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 surprises 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.

Here are some of the stocks this simple screen found:


Market Cap

Share Price

EPS Surprise

Median Analyst
5-Yr. EPS Est.

CAPS Rating

Conexant (NASDAQ:CNXT)

$158.7 million





Cubist Pharmaceuticals (NASDAQ:CBST)

$1.1 billion





E-House (NYSE:EJ)

$1.8 billion





Hi-Tech Pharmacal (NASDAQ:HITK)

$284.1 million





Suntech Power (NYSE:STP)

$2.5 billion





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

Not getting a charge
Fabless semiconductor maker Conexant only temporarily short-circuited its shares' meteoric growth when it priced an offering at a 16% discount to what the stock had been trading at on the day it announced the news. Conexant's shares pulled back sharply last month when it said it would offer 7 million shares for $2.85 each, a nice discount from the $3.39 close on the day it was announced. The next day the stock tumbled to meet that new price. Even so, for a stock that was trading as low as $0.26 just six months prior, Conexant has been on a heckuva tear and the stock has been clawing its way north again.

The company's new management team is working to pay down debt and return the semiconductor company to profitability to better confront the competition it faces from Broadcom (NASDAQ:BRCM) and Texas Instruments (NYSE:TXN). Last month it sold off product lines catering to broadband access to focus more on its core business of imaging, audio, and embedded-modem products and used the $54 million in proceeds to retire debt. The $21 million it received from the offering will do the same.

Although 85% of all CAPS members rating the semiconductor maker tag it to outperform the market, investors remain divided over whether we should expect it to continue on its torrid growth path. CAPS member idaviddude considers the recent jump in worldwide semi manufacturing to be a good indicator for Conexant's own future. Meanwhile, cashsage suggests that the company's stock has gotten ahead of itself. "CNXT has a too high valuation compared to its sales potential. It is also loss making. Its sales are stagnating at least until 2010," writes cashsage.

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!

Suntech Power Holdings is a Motley Fool Rule Breakers 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.