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 170,000 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:
Avg. Analyst 5-Year EPS Est.
Goodyear Tire & Rubber
||$2.5 billion||$0.13 vs. $0.10||31%||**|
||$2.5 billion||$1.06 vs. $0.86||21%||****|
||$2.7 billion||$0.43 vs. $0.31||40%||****|
Source: Yahoo.com 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
If Fed Chairman Ben Bernanke is determined to cause inflation with his monstrous policy of quantitative easing, then we should expect companies like Goodyear Tire & Rubber to suffer as a result of rising commodities prices.
With carmakers Ford
Highly rated CAPS All-Star TheGreatSatan thinks Goodyear is already fighting with one hand tied behind its back because of the steelworkers union, and that could explain why almost one-fifth of the CAPS members rating the tire maker think it won't outperform the market.
Yet with 80% looking for outperformance, Goodyear could end up in the driver's seat as Detroit turns its fortunes around.
I'll drink to that
We are smart enough for the smart grid. Power meter maker Itron reported earnings that came in well ahead of analyst expectations as revenues more than doubled in North America as its Open Way meters powered half of the rise. It shipped 1.3 million units this quarter. Utilities like Exelon
Although international revenues were down this quarter, CAPS player mudwatters still sees them as part of the equation for Itron's future growth:
As the US and other countries modernize their power grids, smart meters will be an important part of the upgrade. Itron can expect to benefit from the upsurge in spending for years to come.
Add Itron to your My Watchlist page to get all the Foolish news and analysis about it compiled in one place.
Man the ramparts
There's still a lot of growth here, especially in MercadoPago. I expect the USD to see continued weakness with QE2 and the general policy of the Fed. This could close the gap between MELI's USD and local currency earnings, and if analysts take this quarter's "miss" as a sign of future weakness, we could see healthy beats in coming quarters.
Join the 920 CAPS members on the MercadoLibre CAPS page and let us know if you side with the 93% who look for it to outperform the broad market averages.
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!
Exelon is a Motley Fool Inside Value selection. MercadoLibre is a Motley Fool Rule Breakers pick. eBay and Ford Motor are Motley Fool Stock Advisor recommendations. Motley Fool Options has recommended a bull call spread position on eBay. The Fool owns shares of Exelon. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.