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:

• 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 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:

Sources: Yahoo!; Motley Fool CAPS. Screen results courtesy of MSN MoneyCentral.

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 any 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.

A chill in the air
When an industry is ramping up growth, it's often difficult to choose who the ultimate winner is going to be. Sometimes the best strategy is to buy a number of the best in the field and let the market sort out which one will become the 800-lb. gorilla. That's essentially the theory behind a best-selling book from the 1990s called The Gorilla Game, and it’s what some investors -- like top-rated CAPS All-Star JackLampka -- think can help sort out the crowded field of solar stocks. JackLampka thinks Yingli Energy just might rule the vines:

There is a great book about investing in high tech titled "The Gorilla Game", written by Geoffrey Moore and few others. If you believe in the financial success of a particular technology, you should pick a basket of companies to invest in the early stages of the technology adoption life cycle since you don't know which ones will become the winners. The solar electricity sector is at this stage. You can actually see some companies that are falling off this basket, e.g. LDK [Solar] (NYSE:LDK), but Yingli Green Energy Holding is still one my eggs in the basket that will keep growing with the demands for cleaner energy and less dependency on oil.

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!