The Way to Prosperity

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 a trust fund as big as Trouble's 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?
Small caps 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 of less than $2.5 billion, to qualify them as small caps
• Share prices above $5, to weed out penny stocks
• An earnings surprise of 20% or more last quarter
• The prospect of growing earnings at least 20% annually for the next five years, according to analysts.

We'll filter our findings through the collective investing wisdom of the more than 97,000 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:

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, and looking at their favorites would be a good place to begin.

Shoring up revenues
Computer-network provider Aruba Networks beat estimates of sorts back in February, when it posted adjusted earnings of a penny a share. Analysts had expected the company to break even. However, those estimates had been based on Aruba's guidance from earlier in the month, when it said it was going to meet the Street's projection of $0.05 per share.

So when is a beat actually a miss? When you tell people to lower their expectations but come in slightly better than what you told them you would. Still, analysts don't see that Aruba is losing its technological edge; rather, it needs to better control costs. As a result, the analysts have sliced their target prices for Aruba nearly in half.

It's that technological edge that has CAPS All-Star joekelly123 seeing Aruba expanding on the contracts it has won. Here's an excerpt from this player's February pitch:

They offer a very flexible and cost effective system in AirOS. ... Been selected to deploy at 107 U.S. Navy installations worldwide. ... [It's] been beaten down badly.

Foolish final thoughts
Academics will tell you that individual investors have little chance of beating the stock market. They say that the likes of Warren Buffett, Shelby Davis, and Peter Lynch 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!