The Market's 10 Best Stocks Revealed

As investors, we want the best stocks for our portfolios.

That's why, at the end of each year, I find myself looking back. I want to know the names of the best stocks of the past decade, and I want to know what we can learn from them.

What's incredible is that the market's 10 best stocks teach a clear lesson -- and it's the same lesson year after year after year.

See the best
We're a few days away from the end of 2007, but I couldn't help jumping the gun. Just take a look at this year's list:

Company

Return, 1998-2007

Jan. 1, 1998 Market Cap

Hansen Natural (NASDAQ:HANS)

21,201%

$16.5 million

Asta Funding

8,252%

$3.1 million

Celgene (NASDAQ:CELG)

6,771%

$129.0 million

Apple (NASDAQ:AAPL)

5,959%

$1.7 billion

Comtech Telecommunications (NASDAQ:CMTL)

4,246%

$11.3 million

Daktronics

3,493%

$23.1 million

Green Mountain Coffee Roasters (NASDAQ:GMCR)

3,455%

$24.7 million

Clean Harbors

3,378%

$15.8 million

Innodata Isogen

3,135%

$3.1 million

Immucor

2,941%

$70.0 million

Data from Capital IQ, a division of Standard & Poor's. Includes only U.S. stocks listed with verifiable stock price histories on major exchanges.

Be the best
Hansen Natural remains the top stock. It held that honor last year as well as the year before that.

And while the retailers from last year's list have dropped from the top 10, they've been replaced by names such as Asta Funding and Green Mountain Coffee Roasters that drive home the exact same takeaway!

Buy the best
This list makes one key investing lesson explicitly clear. If you want to buy the best stocks of the next 10 years, you need be looking at stocks today that are:

  1. Obscure.
  2. Ignored.
  3. Small.

Those traits characterized these 10 best stocks when their remarkable runs began, and it's the same lesson we see over and over again. Ten years ago, Green Mountain was a boutique name from Vermont with just $40 million in annual revenue. Today, it's a nearly $350 million-per-year business that counts McDonald's (NYSE: MCD  ) and ExxonMobil (NYSE: XOM  ) as customers.

Even Apple wasn't a big name back at the beginning of 1998. Although Steve Jobs had just returned to help restructure the company, it was years away from the iPod or iPhone. Most of the market had lost interest in the stock.

Big ain't the best
But look at how many Wall Street analysts are searching for market-beating gains in Apple today. Twenty-seven analysts cover the company, even though it's become a $168 billion behemoth.

Where were they 10 years ago?

They were covering large caps -- the stocks with enough volume and liquidity to be worth Wall Street's time.

You don't need to play that game. You have the opportunity to make serious money by finding stocks today that, again, are:

  1. Obscure.
  2. Ignored.
  3. Small.

Start small in 2008
Uncovering these winners also happens to be our goal at Motley Fool Hidden Gems. Rather than track Apple, we're tracking companies such as Nuance Communications -- a company whose voice-recognition software has the potential to drive the next technology boom.

Yet even Nuance -- a $3 billion company -- is probably too big to be one of the market's 10 best a decade from now. That's why we also highlight Tiny Gems -- companies capitalized at $200 million or less.

To take a look at all of the small cap-stocks we're recommending today, click here to try Hidden Gems free for 30 days. You may not have heard of our companies, but we think that's exactly the point.

Tim Hanson does not own shares of any company mentioned in this article. Nuance Communications is a Hidden Gems pick. The Motley Fool has a disclosure policy.


Read/Post Comments (9) | Recommend This Article (200)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 28, 2007, at 8:30 PM, GoGreenForGold wrote:

    I agree with your analysis:

    Obscure. Ignored. Small.

    So, I'm mildly surprised there has never been any mention of what is going on silently with Wind Energy America Inc., traded as WNEA (OTC/BB). This represents a huge opportunity in the very near term!! Do the Due Diligence, and see!

  • Report this Comment On December 30, 2007, at 6:39 PM, EPS100Momentum wrote:

    HANS has been a great stock, I bought in several times throughout 2003-2006, but took profits too early each time I sold. Yes I made a nice bundle but I could have made alot more if I held. I sold because I tried their energy drinks and they just could not hook me on the taste so I didn't want to get greedy and sold.

  • Report this Comment On January 14, 2008, at 2:27 PM, EPS100Momentum wrote:

    So I love to read these past stock performances. But what investors really need is what is going to do this type of performance in the next 5-10 years.

    After much dd my bet is on Agriculture/Fertilizer sector.

    Some stocks in this list: TRA, TNH, POT, MOS, CF, AG, AGU, COIN, MON

    There is still plenty for these stocks left to run on because food shortage is the worlds biggest problem looking ahead as the worlds population continues to grow rapidly.

  • Report this Comment On July 16, 2008, at 7:13 PM, AGORACOM wrote:

    Tim, FYI. The link to the 2006 list isn't working.

    Regards,

    George

  • Report this Comment On August 06, 2008, at 6:51 PM, ser101 wrote:

    I just love this quote

    "With each passing year, the noise level in the stock market rises. Television commentators, financial writers, analysts, and market strategists are all overtalking each other to get investors' attention. At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Yet, despite all this available information, investors find it increasingly difficult to profit. Stock prices skyrocket with little reason, then plummet just as quickly, and people who have turned to investing for their children's education and their own retirement become frightened. Sometimes there appears to be no rhyme or reason to the market, only folly."

    This is a quote from the preface to a published biography about the long-term value-oriented stock investor Warren Buffett.

    http://money-finance-talk.blogspot.com

  • Report this Comment On October 23, 2008, at 4:28 AM, dividendgrowth wrote:

    Trying to strike home runs with small companies is like buying lotteries. They can crash and burn at any time. Just ask any CROX bagholders about how they feel. If you want to gamble in small growth stocks, better use IBD's CANSLIM system because it actually tells you how to control the risk.

  • Report this Comment On December 15, 2008, at 2:11 PM, tickedoff123 wrote:

    i just sold my gmcr stock. because of the tenn senator screwing gm stockholders. paybacks are hell. will not support down south industry.

  • Report this Comment On January 02, 2009, at 11:27 AM, Slipswitch wrote:

    I lost too much in Hidden Gems. Buy and hold forever doesn't work with these. Without a sell plan this is not a good strategy.

  • Report this Comment On January 07, 2009, at 12:56 AM, SallijaneG wrote:

    I partly agree with Slipswitch; Hidden Gems is not for long-term buy and hold, as the risk of bubbles with small issues is great. IPOs in particular are known for quick rises followed by a precipitous drop. I considered buying AOL decades ago (I don't know whether it was ever a Hidden Gem; don't think the Fools were about then, but it was one of the first ) after watching it rise, split, and rise again a few times, and finally got the courage to buy literally the day before the merger with Time Warner was announced, upon which it descended from my purchase price of $70 to about $15, where it is now. If I had bought when I first wanted to, about the second split after hitting $100, the tale would have been different. (We all have those stories.) The moral, IMHO: watch your stocks regularly, use stop-loss orders judiciously, and, when possible, sell enough splits to recoup your initial investment. The key for me is to reevaluate regularly with independent research.

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