Build Your Fortune With These Winners

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:

• 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?
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:

Source: Yahoo.com. NC=not calculable, because of negative earnings.

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 whether analysts' faith in them is well-founded, but we have the CAPS community helping us here, and starting with their favorites would be a good place to begin.

An alternative opportunity
Drug developer Synta Pharmaceuticals is working on small-molecule drugs to treat a variety of medical conditions, including inflammation and cancer. It's had a few setbacks along the way, such as last year, when it reported disappointing results from one potential cancer treatment and consequently had GlaxoSmithKline (NYSE:GSK) back out of a deal.

Highly rated CAPS member TSIF acknowledges a former bearishness on Synta but believes the beating the stock has taken lately is overdone. With potential good news in the works, this one could bounce higher, said this All-Star in early January.

Synta Pharmaceuticals is one that I've downthumbed a few times as it spikes between various positive and negative test results. ... My upthumb interest today is two fold. Once the beating Synta took today pushing it down 17% and two some phase II data to be released later this month on a study of apilimod in rheumatoid arthritis. 

[The] 17% [knockdown] was due to a share issue at $4.50. Investors clearly revolted to level the stock down to the issue price. This is normal and while 17% detrimental (on paper) to those holding the stock yesterday, such corrections back to an equity offering price usually results in a fresh climb back up. That Synta found new blood at $4.50 usually works to validate the current share price. 

Like RXi Pharmaceuticals (NASDAQ:RXII), this could be another pharmaceutical company just warming up. Synta has been flying under the radar of many investors, and 85% of just 142 CAPS members rating the biopharmaceutical to outperform the market. Add your opinion on the Synta Pharmaceuticals CAPS page and tell us whether this one will recover.

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!