You don't need the investing acumen of Warren Buffett or the riches of a trust fund baby to achieve financial success.

Since the stock market is your best hope for realizing your dreams, start investing today, by putting away small sums of money every month. Then seek out undervalued small-cap stocks for your greatest returns. I like these stocks because they offer opportunities for growth, while still being mostly overlooked by the big investors.

To find these future giants, we'll screen for stocks with market values less than $3 billion, an earnings surprise of 15% or more in the previous quarter, and forecasts for long-term earnings growth potential of at least 15%. We'll filter our findings through the collective investing wisdom of the 165,000 members in our Motley Fool CAPS community. If the best and brightest CAPS players think these stocks hold potential, we ought to take notice, too.

Here are some of the stocks this simple screen found:


Market Cap

EPS Surprise

Avg. Analyst 5-Yr EPS Est.

CAPS Rating (out of 5)

Power-One (Nasdaq: PWER)

$965 million

$0.17 vs. $0.10



Teradyne (NYSE: TER)

$1.8 billion

$0.69 vs. $0.47



Zoltek (Nasdaq: ZOLT)

$330 million

($0.01) vs. ($0.04)



Source: and 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. Still, since the CAPS community's helping us out, their favorite selections might be a good place to begin.

An alternative opportunity
Power-One, a maker of power conversion and management products, should be buoyed by the better-than-expected industrial production numbers that were posted yesterday. The Federal Reserve said that after a 0.1% decline in June, the country's industrial production put up a rather strong 1% increase in July. With Ford (NYSE: F) and General Motors churning out cars more rapidly, automobile output alone accounted for 0.4% of the increase. With the economy still in expansion mode, it's giving some observers hope that a recovery may yet gain traction.

Although Power-One's inverters are targeted to the solar and wind energy segments of the economy, the renewable energy industry has been sagging as a result of the overall impact that the recession has had on the country' industrial base. A recovery in the one will help resuscitate the other. Still, Power-One itself has bucked the downtrend, with its shares up more than 700% over the past year.

Some 83% of CAPS members think Power-One will continue a power surge forward and outperform the broad market averages.

A recovery would be welcome for the rest of the CAPS Wind Power sector, which has only advanced some 9% over the past year. More recently, some of the bigger names in the industry have posted disappointing numbers. Vestas, the biggest name in wind, cut its 2010 earnings expectations in half; deliveries will be delayed till late in the year, and thus won't be recognized as income. A-Power Energy Generation Systems (Nasdaq: APWR) also missed analyst estimates, meaning carbon fiber maker Zoltek could face headwinds too.

Zoltek counts on Vestas for more than half its revenue, and had been predicting a strong second half of 2010. That outlook might need to be revised. CAPS member wstimson says on both counts, Zoltek's technical and fundamental strengths are deteriorating.

I'll drink to that
These conflicting signals on the economy's direction showed up even in Teradyne's otherwise surprisingly good earnings report. The semiconductor test equipment maker handily beat analyst expectations on revenue and earnings, but its orders were down sequentially, despite more than doubling year over year. Semi test was up incrementally, but not nearly enough to offset the large slide in systems test.

But Intel (Nasdaq: INTC) expects a new upgrade cycle in computers, which should help bolster test equipment. Analysts alos believe that other areas of the tech sector, like printers and copiers, will benefit from increasing demand. Lexmark (NYSE: LXK) recently put up exceptionally strong numbers.

That could be why 88% of CAPS members rating Teradyne believe it will turn in future quarters of outperformance. Chip in with your opinion on the Teradyne CAPS page, and let us know which way you think the winds are blowing.

Foolish final thoughts
Stock investing is not brain surgery. Finding good, undervalued companies is not as difficult as the professionals want you to think. You just have to commit to starting now, and do so regularly. Now's the time to begin!

Intel is a Motley Fool Inside Value pick. Ford is a Motley Fool Stock Advisor recommendation. The Fool owns shares of and has written puts on Intel. Motley Fool Options has recommended buying calls on Intel. 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.