Amass a Fortune With These Stocks

You don't need the investing acumen of Warren Buffett or the riches of a trust fund baby to achieve financial success.

Small sums of money invested monthly in undervalued small-cap stocks offer hope for your greatest returns. They offer the best opportunities for growth because they're mostly ignored by the big investors.

Below, we screen for stocks under $3 billion in market cap, offering earnings surprises of 15% or more in the previous quarter, with long-term earnings growth forecast to be at least 15%. We'll then filter our findings through the collective investing wisdom of the 180,000 members in our Motley Fool CAPS community.

Here are some of the stocks this simple screen found:


Market Cap

EPS Act. vs. Est.

Avg. Analyst 5-Yr. EPS Est.

CAPS Rating (out of 5)

Crocs (NAS: CROX) $1.7 billion50%25%*
ZAGG (NAS: ZAGG) $299 million40%26%*

Source: and 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.

A winner, or a crock?
It's hard for me to imagine, but footwear fashion maven Crocs is a huge international business. About 65% of its sales come from outside the U.S., with Japan representing $150 million in revenues and Europe $170 million. So it's not just a bunch of toddlers running around in the plastic shoes.

Yet only mentioning the plastic kicks doesn't begin to scratch the surface of what the company is anymore. It has invested in more styles, colors, and materials, so much so that the Ugg boot from Deckers Outdoor looks staid in comparison. It's a lesson Skechers (NYS: SKX) could learn from. Skechers went all-in on the toning shoe craze and stumbled when someone tied its laces (it is looking for more international growth, though, hoping to double sales in Japan over the next five years).

Although shares are essentially flat for the past year, Crocs is trading 26% higher in 2012. CAPS member madMNinvestor thinks its product and geographic diversification will lead to greater growth still.

Great growth and diversification of revenue streams. Growing international markets as well as US markets with their core products as well as new products being introduced.

Tell us on the Crocs CAPS page whether you think it will run higher, then add the stock to your Watchlist to see if it remains fleet of foot.

Zig when others zag
I'll admit upfront I don't see ZAGG being a top performer. Last summer, I took a look at its inventories and saw finished goods rising five times faster than sales. That made me suspect that there were a lot of invisibleSHIELDs piling up on retailers' shelves. I rated it to underperform the market on CAPS, and it certainly played out that way. The stock is down almost 18% since then (compared to a 7.5% gain in the S&P 500) and was down a whole lot more before it made its most recent run. Shares have climbed 42% in 2012.

So is it time to close out that pick? I'll admit to being torn. On one hand, it's got a highly commoditized product, but on the other, as my colleague Rick Munarriz points out, it's got a heckuva great distribution system. Moreover, with more than half of its sales coming from protective film covers for tablet and smartphone screens, Apple's (NAS: AAPL) coming launch of the "new iPad," and perhaps later this year the iPhone 5, give me every reason to believe ZAGG will confound its critics.

One game-changing development, though, could be ZAGG's partnership with HZ0, a waterproofing technology that protects your electronic device when it's submerged in water. ZAGG expects it to hit the market in time for "next season's" smartphones, and I'm guessing it will be a big seller. 

So on second thought, maybe I'm not so torn after all. I'll be closing out my underperform rating on CAPS and siding with dkm755, who points to HZ0 and ZAGG's dominant industry position to suggest growth is just getting started.

People always reference the low barriers to entry, yet ZAGG is still the dominant player. They also forget the exposure to HZO and its award winning waterproofing technology.

Add ZAGG to the Fool's free portfolio tracker and tell us in the comments section below whether you think its downside risk is protected.

Foolish final thoughts
These companies may have the odds stacked against them, but the Motley Fool has identified two stocks that are also facing difficult times yet still grow revenues hand over fist. The report is free, but it's only available for a short time, so ask for your copy today and find out the two cash kings that are changing the face of their industry.

At the time this article was published Fool contributorRich Dupreyowns shares of Skechers USA, but he holds no other position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Apple.Motley Fool newsletter serviceshave recommended buying shares of Apple and Skechers USA, as well as writing naked calls on ZAGG and creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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