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, ultimately amassing 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 less than $2.5 billion, to qualify as a 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 105,000 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:

Screen results courtesy of MSN MoneyCentral; data courtesy of Yahoo!; CAPS ratings courtesy 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. With the CAPS community at our disposal, starting with their favorites might be a smart move.

A chill in the air
Women's fashion retailers this year seem to have a more difficult time than most, though AnnTaylor (NYSE:ANN) seemed to buck the trend, while New York & Co. (NYSE:NWY) beat analyst expectations. Coldwater Creek, despite a 19% drop in same store sales -- ouch! -- also reported a narrower loss than expected, raising its guidance for the full year. While many retailers perhaps have been a bit premature in calling a bottom for this economy, the women's fashion world may be a trendsetter in more than just clothes.

Not everyone, though, is convinced that things won't get worse before they get better. CAPS investor LEGMAKER feels that high fuel prices will continue to play havoc with results, and that Coldwater Creek may be more vulnerable than some because it also operates a series of spas:

Most of these companies will continue to see ok numbers as they have teens and other garments sections to fall back on. Coldwater Creek may be another story. This company pursues females over the age of 35. As gas has become more expensive many of these women will scale back on their wants. Family vacations are going to still happen although they will not be as far or extravagant and to find the money to do so they will not spend on clothing. Another interesting aspect of this company is their spas. This is important as these treatments and other frilly wants are the first to go when the money isn’t their.

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 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. There's no time to lose!