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)
  • An earnings surprise of 20% or more in the latest  quarter
  • Long-term earnings growth potential of at least 20%             

We'll filter our findings through the collective wisdom of the more than 150,000 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 Estimate

CAPS Rating
(out of 5)

American Apparel (AMEX: APP)

$200 million





IMAX (Nasdaq: IMAX)

$889.1 million





Kopin (Nasdaq: KOPN)

$250.5 million





Volcano (Nasdaq: VOLC)

$1.1 billion





XenoPort (Nasdaq: XNPT)

$246.9 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, so let's start with its favorites.

An alternative opportunity
As hospital spending begins to normalize, medical device makers like Intuitive Surgical (Nasdaq: ISRG) ought to get more business for pricey surgical-assistance products. However, analysts are looking for device makers in general to do better. So it makes sense to look for other innovative manufacturers such as Volcano, which sells intravascular ultrasound and functional measurement products, and sports the classic razor-and-blade business model.

Small but as-yet-unprofitable companies like Volcano are risky, often plagued by unforeseen events. For example, a jury recently found the company guilty of interfering with a rival's business relationships. But the rewards of getting in early here may be enormous. The Food and Drug Administration granted Volcano approval to market a digital version of its catheter, which it will begin selling in the second quarter.

Having already unseated the significantly larger IVUS-maker Boston Scientific (NYSE: BSX) as the industry leader in this technology, Volcano is beginning to attract support from investors, and its shares have risen about 60% over the past year. You can't look at traditional metrics to value the company, but as it approaches profitability, it will cement itself in the industry's upper crust.

Some CAPS members are behind the company, with 91% of the members rating it saying it's likely to outperform the market averages. Perhaps more tellingly, an even higher percentage of All-Stars agree. Because coronary disease remains one of the leading causes of death, combining ultrasound imagery with catheters to view the inside of the artery "fits well with our aging population," CAPS member Wildmagic7 says.

Head over to the Volcano CAPS page and let us know what you think about the company.

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. At The Motley Fool, we disagree. 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.

IMAX, Intuitive Surgical, and Volcano are Motley Fool Rule Breakers recommendations. 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. The Motley Fool has a disclosure policy.