The Market's 10 Best Stocks Revealed

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As investors, even in volatile times like these, we want to put the best stocks in our portfolios for the long term.

That's why I look back, at the end of each year, at the best stocks of the previous 10 years to find out 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	19,449%	$16.5 million
Asta Funding	7,856%	$3.1 million
Celgene	6,472%	$129.0 million
Apple	5,937%	$1.7 billion
Comtech Telecommunications	4,189%	$11.3 million
Green Mountain Coffee Roasters	3,389%	$24.7 million
Daktronics	3,294%	$23.1 million
Clean Harbors	3,209%	$15.8 million
Innodata Isogen	3,013%	$3.1 million
Immucor	2,893%	$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And although the retailers from last year's list have dropped from the top 10, they've been replaced by names such as Asta Funding and Green Mountain Coffee Roasters, which drive home the exact same takeaway!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 explicit. If you want to buy the best stocks of the next 10 years, you need to look today at stocks that are:

• Obscure
• Ignored
• Small

Those were the traits of these 10 best stocks when their remarkable runs began, and we see that same lesson 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 $450 million-per-year business that counts ExxonMobil as a customer.

Even Apple wasn't a big name 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 search for market-beating gains in Apple today. Thirty-five analysts cover the company, even though it's become a $92 billion behemoth.

Where were they 10 years ago?

They were covering mid- and large caps -- the stocks with enough volume and liquidity to be worth Wall Street's time. But look at how the 10 biggest stocks at the beginning of 1998 performed over the past 10 years (including dividends):

Company	Return, 1998-2007	Jan. 1, 1998, Market Cap
General Electric (NYSE: GE)	86%	$240 billion
Unilever	104%	$211 billion
Tyco (NYSE: TYC)	62%*	$179 billion
Microsoft (Nasdaq: MSFT)	155%	$156 billion
ExxonMobil	277%	$151 billion
Altria	263%	$110 billion
Toyota	98%	$109 billion
Procter & Gamble (NYSE: PG)	119%	$107 billion
IBM (NYSE: IBM)	122%	$102 billion
Wal-Mart (NYSE: WMT)	163%	$89 billion

*Through June 2007 spinoff.

Not bad in some cases, but not nearly as good. 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 following the likes of Nuance Communications -- a company whose voice-recognition software has the potential to drive the next technology boom.

Yet even Nuance -- a $2.5 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 look at all of the small-cap stocks we recommend today, click here to try Hidden Gems free for 30 days. You may not have heard of our companies; 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. Apple is a Stock Advisor selection. Tyco, Microsoft, and Wal-Mart are Inside Value picks. Unilever is an Income Investor recommendation. The Motley Fool has a disclosure policy.