As investors, we want the best stocks for our portfolios.
That's why I find myself looking back at the end of each year. I want to know the names of the best stocks of the past decade, and what we can learn from them.
Incredibly, the market's 10 best stocks teach a clear lesson -- and it's the same lesson year after year after year.
See the best
Take a look at this year's list:
|
Company |
Return, 1998-2007 |
Jan. 1, 1998 Market Cap |
|---|---|---|
|
Hansen Natural |
21,201% |
$16.5 million |
|
Asta Funding |
8,252% |
$3.1 million |
|
Celgene |
6,771% |
$129.0 million |
|
Apple |
5,959% |
$1.7 billion |
|
Comtech Telecommunications |
4,246% |
$11.3 million |
|
Daktronics |
3,493% |
$23.1 million |
|
Green Mountain Coffee Roasters |
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 |
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And while the retailers from last year's list have dropped from the top 10, they've been replaced by names such as Asta Funding and Green Mountain Coffee Roasters, which drive home the exact same takeaway!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:
- Obscure.
- Ignored.
- 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 more than $40 million in annual revenue. Today, it's a nearly $350 million-per-year business that counts McDonald's and ExxonMobil 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 $118 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. But look at how the best large caps performed over the past 10 years:
|
Company |
Return, 1998-2007 |
Jan. 1, 1998 Market Cap |
|---|---|---|
|
Nokia |
659% |
$16,575 million |
|
BHP Billiton |
641% |
$19,770 million |
|
Oracle |
507% |
$21,875 million |
|
United Technologies |
386% |
$16,965 million |
|
ConocoPhillips |
369% |
$12,975 million |
Not bad, but not nearly as good. So you don't need to play that game. Make serious money by finding stocks today that, again, are:
- Obscure.
- Ignored.
- 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.
This article was first published Dec. 26, 2007. It has been updated.
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.
