The Path 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:

1. Start today!
2. Invest regularly. Every month, put away $250, $100, even $50.
3. Look to the stock market for your best hope of realizing your dreams.
4. 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 less than $2.5 billion, to qualify 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 100,000 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. It's 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 and starting with their favorites would be a good place to begin.

Clarity for the future
Undoubtedly you've seen the commericals for the warring factions in the coming switch to all-digital television signals. This year saw the mandated inclusion of upgraded tuners in your TV sets. Soon we may all have some sort of high-definition screen in our living rooms. Which will sit just fine with Silicon Image whose bevy of patents gives it a dominant role regardless of whether Sony (NYSE: SNE) or Phillips (NYSE: PHG) built your television or even the cable box they plug into -- they'll have to pay royalties for every HDMI and DVI plug that is present.

With the coming end of analog signals, investors like CAPS player 007Kevin think institutions will soon realize the potential for Silicon Image and begin buying en masse.

With the coming switch to digital signal in 2009 a great many people will be up grading there tv's. [Silicon Image] will jump in price as mutual funds snatch up shares as we get closer to the end of the line for the Analog signal. ... At this price it meets my criteria of being cheap!

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!