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Here's Your Shot to Score Big

Some of the best investment advice I've ever heard came from "The Great One."

But I don't mean Peter Lynch, Benjamin Graham, or even Warren Buffett. (Though as you're about to see, Buffett is a big fan of The Great One, too.) And I definitely don't mean Jim Cramer.

You've probably heard The Great One's name dozens of times, but you may not know just how wise he is. Nonetheless, he's said some very smart things. For instance ...

"You miss 100% of the shots you never take"
That's but one of the many pearls of wisdom The Great One has dropped over the years. And while it might seem obvious, or even trite, it's a truth we often take for granted.

Just think of the person you never asked to the dance, or the job you never applied for, or the novel you never finished ... or the stock you never purchased.

It happens to all of us. We get nervous, or doubtful, or busy, or ... you name it. And that might end up costing us the person of our dreams, or the job we've always wanted, or our only shot at fame. But in the case of investing, it will definitely cost us a fortune.

Back in 2007, two stocks sat on my watch list for a full 365 days:


Gain in 2007

Market Cap Today



$166 billion



$3.3 billion



$179 billion

A $32,100 mistake
Should I have bought them? Perhaps. But by not investing in them, I wound up making a grand total of ... nothing. Nada. Zip. Zilch.

That's a bitter pill to swallow, especially considering that if I'd invested five grand in each company at the beginning of 2007, I would have been sitting on $32,100 one year later.

I guess that's not as bad as all the people who boasted about how they were going to buy Apple (Nasdaq: AAPL  ) , Fifth Third Bancorp (Nasdaq: FITB  ) , or American Express (NYSE: AXP  ) this time last year, then didn't. But it does go to show you that if you want to score, you've got to take a shot.

And if we want to score really, really big ...
In that case, we have to follow The Great One's most famous piece of advice: "Skate to where the puck is going, not to where it's been."

You may already know that The Great One is hockey legend Wayne Gretzky. If not, all you need to know is that Gretzky was arguably the greatest player ever to take the ice.

What made him The Great One? Quite simply, he was always one step ahead of everyone else -- not because of his speed, but because of his anticipation. While everyone else skated to where the puck had just been, Gretzky always skated to where it was going next.

That's the key to great investing, too
And apparently, I'm not the only one who thinks so. In an op-ed piece he penned for The New York Times, Warren Buffett used this same quote to make the point that investors who keep their cash on the sidelines when market sentiment is negative are missing out on a potentially huge opportunity.

While I couldn't agree more with Mr. Buffett, I think this quote has an even more meaningful connection to small-cap investing. If you look at the tables below, you'll start to notice an interesting correlation between market cap and percentage gain: The smaller the business, the greater the returns. While this won't always be the case, this data is a quick and dirty way of showing that the best performers do indeed start small.

That's also how you can skate to where the puck is going next.

Bigger isn't better, but size does matter
For proof, just have a look at the top 10 performing stocks of the past 52 weeks with market caps greater than $5 billion:


Market Cap

52-Week Gain

Teck Resources

$21.3 billion


Fifth Third Bancorp

$9.6 billion


Genworth Financial

$7.7 billion


Mechel OAO

$9.4 billion



$38.2 billion


Las Vegas Sands

$10.5 billion


XL Capital

$6.2 billion


Seagate Technology

$9.7 billion


Royal Caribbean Cruises (NYSE: RCL  )

$5.8 billion


Tata Motors (NYSE: TTM  )

$6.6 billion


Data provided by Google Finance.

Now compare that with the top 10 performing stocks of the past 52 weeks with market caps less than $5 billion:


Market Cap

52-Week Gain

Diedrich Coffee

$199 million


Dollar Thrifty Automotive

$631 million


Orient Paper

$139 million


Select Comfort

$348 million


Dana Holding Corp. (NYSE: DAN  )

$1.5 billion


ValueVision Media

$135 million


Avis Budget Group

$993 million


Pier 1 Imports (NYSE: PIR  )

$691 million


Valassis Communications

$1.2 billion


Keryx Biopharmaceuticals

$134 million


Data provided by Google Finance.

So, here's how you can score big in 2009 and beyond ...
First off, keep Buffett's advice in mind. Second, keep The Great One's advice in mind. Finally, take a page out of my colleague Tim Hanson's book, and make sure to dedicate at least a portion of your time to researching stocks that are obscure, ignored, and small.

These three traits have characterized some of the best-performing stocks of the past decade. More importantly, they will characterize some of the most lucrative stocks of the next 10 years.

In fact, we started our Motley Fool Hidden Gems service precisely to uncover businesses with these three traits. Since day one, our team members have dedicated themselves to discovering where the puck is going next.

And thanks to continuing market uncertainty, many of today's most promising small-cap stocks are still selling at bargain-basement discounts. So, if ever there were a perfect time to take your shot and score big, this is it.

Need a little help uncovering great small-cap stocks?
Great! You can get all of Hidden Gems' top small-cap research and recommendations -- including our top two picks for new money -- absolutely free by taking a 30-day guest pass.

You'll also be able to follow along as the Hidden Gems team invests $250,000 of The Motley Fool's own money in a best-of-the-best small-cap portfolio (so far, 12 of their 17 open positions are in the green, and three are already up more than 50%).

This offer is completely risk-free, with no obligation to subscribe. To get started, simply click here.

This article was first published Jan. 25, 2008. It has been updated.

Austin Edwards finally did buy shares of Google, Apple, and Chipotle in 2008. Chipotle Mexican Grill is a Motley Fool Hidden Gems recommendation. Chipotle Mexican Grill and Google are Rule Breakers picks. Apple and Ford are Stock Advisor recommendations. American Express is an Inside Value pick. The Fool owns shares of Chipotle. The Fool's disclosure policy is the coolest game on Earth.

Read/Post Comments (3) | Recommend This Article (13)

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 February 28, 2010, at 8:15 AM, bmc007 wrote:

    I first heard about Tata Motors (TTM) when they were at $4.00. I forgot all about them until I read an article about then some time later. I checked the price and it was at $8.00. For some reason, which to this day I don't understand, I didn't pick up on them then and then watched as they rose to $12.50 before I pulled the trigger. Happily enough they've risen since. Boy, talk about the one that got away, or for a good part got away!

  • Report this Comment On March 01, 2010, at 9:43 AM, noryakerson wrote:

    I don't care that the small caps shown here are top performers over the short term. Investing in most of them would have been speculative at best. Many of the company's on the list probably won't even be around in a couple of years. I'd much rather go with a larger, more stable company, than roll the dice on a floundering small cap.

  • Report this Comment On March 02, 2010, at 2:30 PM, ekaneshige wrote:

    Fallacious reasoning. How many other stocks were on your watch list with Google, Chipotle, and Apple? What did they all do? If you had thrown $500 on each of them, what would your return have been? The stock market isn't roulette and isn't hockey. Wayne Gretzky wasn't giving financial advice when he said you miss 100% of the shots you don't take.

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