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The Market's 10 Best Stocks

By Tim Hanson (TMF Mmbop) December 29, 2005 Comments (2)

134 Recommendations

The greatest stocks of the past decade are not the ones you'd expect. Microsoft isn't on the list. And Starbucks doesn't crack the Top 50. I wouldn't have been able to name any of the Top 10 on the spot. Which just goes to show, we probably haven't even heard of the best 10 stocks of the next 10 years. But I'm getting ahead of myself.

Without further ado, the 10 top performers:

Company

Current Market Cap*

Return Since 1/1/96

Hansen Natural (Nasdaq: HANS)

$1,850

24,185%

Chico's (NYSE: CHS)

$7,780

17,600%

NVR (AMEX: NVR)

$4,360

7,150%

Christopher & Banks (NYSE: CBK)

$650

6,795%

Meritage Homes (NYSE: MTH)

$1,800

5,860%

American Eagle Outfitters (Nasdaq: AEOS)

$3,140

4,850%

Comtech Telecommunications (Nasdaq: CMTL)

$715

4,315%

SCP Pool (Nasdaq: POOL)

$2,000

4,090%

Engineered Support Systems (Nasdaq: EASI)

$1,730

3,800%

Jos. A. Bank (Nasdaq: JOSB)

$580

3,790%

Total Average Return

8,240%

Total Annualized Return

55.6%

*In millions. Historical price data provided by Capital IQ.

There are more than a few things that are shocking about this list. First, these companies are obscure. Hansen Natural -- the greatest stock of the past decade -- has sold all-natural juices and sodas since the 1930s. Chico's sells clothes to women in their 30s, and 10 years ago it had fewer than 250 stores. SCP Pool -- a company with 45% annual returns -- wholesales swimming pool supplies and chemicals!

Second, there's only one "tech" firm on the list. And it's not one of the famous ones. Only four analysts are currently following Comtech.

Ten years ago, none of these companies were heavily followed by the pros on Wall Street, and even more incredibly, some still aren't.

Finally, none of these companies were worth more than $200 million 10 years ago. And even after 10 years of incredible growth, seven of them are still small caps! Only Chico's, NVR, and American Eagle have moved comfortably into mid-cap status.

The Foolish bottom line
The greatest stocks of the last decade were:

  1. Obscure
  2. Ignored
  3. Small

Now how many investors are searching for market-beating returns among the Microsofts and Starbuckses of the world? Twenty-nine and 16 analysts follow each of these stocks, respectively. But these companies can't beat the market -- they are the market!

So if you want to find the 10 best stocks of the next 10 years, you need to start small -- as in small caps. These are exactly the types of companies that we're following at Motley FoolHidden Gems. We don't care about Microsoft. Instead, we follow Blackboard, an $800 million software firm that supplies 2,225 educational institutions with 90% product renewal rates.

But an $800 million company is probably still too big to be one of the 10 best when we look back in 2016. That's why we also offer Tiny Gems -- promising companies capitalized at less than $200 million. One of the next 10 best will likely come from there.

To take a look at the 60 small caps we're following and the Tiny Gems we've dug up, click here to take a free trial to Hidden Gems. You may not have heard of our companies, but that's exactly the point.

Tim Hanson owns shares of Blackboard. Microsoft is an Inside Value recommendation. No Fool is too cool for disclosure ... and Tim's pretty darn cool.

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.

  • On December 22, 2007, at 2:55 PM, eagle60 wrote: Report this Comment

    As a CHS holder, i can tell you staight up that the stock died over a year ago--yes, i still hold it and yes, i've lost a lot of money and yes, there has been a change in leadership--but--i haven't seen and real forward movement toward.

    In summer we were looking at

    19--then 17 dollars a share--today it's around a whopping 9.50!!

    yippee ---

    but if you know something positive that i don't know--it would be a great Christmas present to me!

    jamie

  • On December 22, 2007, at 2:56 PM, eagle60 wrote: Report this Comment

    eagle60

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