You just need some fleecey material to make your puppet. Go a little bit further and you can make a fig plushie.
For this instructable I only had time enough after dinner to create the puppet head. I was going to add arms, hands (4-fingers - all puppets have only 3 or 4 fingers, something about the rules of cartooning), legs and oversized footwear
You can use some white felt scraps or material for the eyes. I used two ping pong balls that I drew the pupils on with a permanent marker.
The whole thing can be hand sewn but I use my serger and sewing machine to prototype.
This puppet was created on the fly so you might note some imperfect seams and such.