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 Miley Cyrus' 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, according to analysts, at least 20% annually for the next five years.

We'll filter our findings through the collective investing wisdom of the more than 110,000 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! Finance; 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 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.

An energized performance
Not only do we have demand pushing oil higher, but you've got analysts predicting it will soon hit $200 a barrel. That almost creates a self-fulfilling prophecy. But Bois d'Arc Energy was already a top-shelf shelf exploration company before Stone Energy (NYSE:SGY) agreed to buy it out. It is this past performance that has attracted investors like CAPS player hbrownh2, who said:

Sales growth, income growth and profit margin are all good. Looks like it has had a steady pace upward. I think this stock still has room to grow.

A cloudy future
Stellar performance hasn't been on the side of Hoku Scientific lately. As top-rated CAPS All-Star unvrsldeflation noted, it had to wait on financing to move forward. Still, the solar industry is very much on the upside, so Hoku might end up being more than hokum.

Their problems are understandable as they have involved financing. Any company whose future is so reliant on a financial deal to go through in this murky time is in doubt. Seeing as how the future has a lot to do with solar, however, Hoku at this price should be added to any diversified portfolio, either by hook or by crook. It is a risk, in other words, but if you are diversified you should be able to absorb that risk seeing as how there is a legitimate reward to believe in and you aren't counting on this one stock only.

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!