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 145,000 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

EPS Surprise

Median Analyst
5-Year EPS Est.

CAPS Rating
(out of 5)

Cypress Bioscience (NASDAQ:CYPB)

$228.6 million






$209.9 million





Hypercom (NYSE:HYC)

$168.2 million





Jinpan International (NYSE:JST)

$401.6 million





Smart Balance (NASDAQ:SMBL)

$391.4 million






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 their favorites would be a good place to begin.

An alternative opportunity
Generating 20 gigawatts of capacity last year, China became the third-largest provider of wind energy in the world behind the U.S. and Germany, but it has its sights set on becoming the industry leader. A study in the journal Science estimates China can meet all of its electricity needs through wind power by 2030 if it continues on as it has.

Such predictions no doubt fuel hopes for growth at industry giants Vestas and General Electric (NYSE:GE), but it's also part of the tailwind behind Jinpan International, a manufacturer of cast resin transformers for high-voltage distribution equipment. It reported rising third-quarter sales and profits that jumped more than 80% over the year-ago period. Wind energy projects represented 18% of net sales in the quarter.

As China's power grid continues to be updated, CAPS member bizcbug7 thinks Jinpan's position makes it a winner:

Build out of China's power grid. Related to wind power, will be big in China with wind farm growth and it's part of their stimulus program. ROE 25.7, industry 0.7, D/E 0 vs 0.5, earnings trend up.

Sure China is focused on gaining supremacy, but the U.S. is also building out its wind energy network. Utility ITC Holdings (NYSE:ITC), for example, is developing the Green Power Express to move upward of 12,000 MW of renewable energy from wind-swept areas of the country to major Midwest load centers. There may be just as many domestic opportunities here at home to capitalize on.

Yet the CAPS community remains firmly behind Jinpan, with 98% of the members rating the equipment provider selecting it to outperform the market. Head over to the Jinpan International CAPS page to give your opinion on its chances of blowing away the competition. 

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!

Smart Balance is a Motley Fool Rule Breakers choice. Hypercom is a Motley Fool Stock Advisor recommendation. The Fool has a financial position in Jinpan International. 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.