The Motley Fool Previous Page


The Market's 10 Best Stocks Revealed

http://www.fool.com/investing/small-cap/2008/04/18/the-markets-10-best-stocks-revealed.aspx

Tim Hanson
April 18, 2008

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

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And although the retailers from last year's list have dropped from the top 10, they've been replaced by names such as Asta Funding and Green Mountain Coffee Roasters, which drive home the exact same takeaway!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 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 $385 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. Twenty-eight analysts cover the company, even though it's become a $140 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  )

169%

$240 billion

Unilever

148%

$211 billion

Tyco (NYSE: TYC  )

260%

$179 billion

Microsoft (Nasdaq: MSFT  )

228%

$156 billion

ExxonMobil

362%

$151 billion

Altria

228%

$110 billion

Toyota

118%

$109 billion

Procter & Gamble (NYSE: