Just like folks who go fishing, investors love to tell tales of "the one that got away."

We speak remorsefully about the stocks that could have, would have, or should have made us a fortune -- if only we had made an investment.

Maybe you were an early fan of Deckers Outdoor shoes, but you didn't invest in the company back then. Now, every time you hear that it was one of the market's 10 best stocks from 1999 to 2008, you wish you could time-travel back to 1999 and invest just $1,000 in the company's stock. Today, that tiny investment would be worth $14,000.

Sadly, the flux capacitor is fictional.

Mustard seeds
"The stock that got away" is usually a small company that made it to the big leagues. That makes sense because those are the stocks with the most room to grow. You simply don't hear stories about people missing the boat on mega-caps such as Hershey (NYSE:HSY) or Procter & Gamble (NYSE:PG) -- unless the storyteller was born in 1902.

Although large companies such as these may have many years of steady growth ahead of them, their high-growth stages have long since passed.

One of the worst things an investor can do is invest in "the stock that got away" after it has reached large-cap status in hopes that it will repeat its past performance. The law of diminishing returns makes such a feat difficult to achieve.



Return, March 1989-1999

Return, March 1999-2009

Aflac (NYSE:AFL)



Hewlett-Packard (NYSE:HPQ)



Mylan (NYSE:MYL)









Data from Yahoo! Finance. *From March 26, 1990 for Staples and Paychex.

As you can see, even with decent results like Hewlett-Packard and Paychex, there's often a stark difference between the stocks' most recent 10-year returns and their previous 10-year returns.

Catch the next one
The good news is there's no need to dwell on "the stock that got away." Tomorrow's big catches are out there right now, masquerading as small caps. The problem is, it can be hard to locate tomorrow's winners among the thousands of small companies on the market, especially with all of the market turmoil we've experienced. But the down market makes the search for great small companies even more exciting because some of the best companies of the next 10 years are trading at great prices right now.

To get started, look for companies that have little or no debt on their books, dominant positioning in their market niche, and founders with large personal stakes. These are some of the criteria the Motley Fool Hidden Gems team uses to select small-cap stocks for its subscribers. Since July 2003, the strategy has outperformed the market by five percentage points.

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This article was originally published Jan. 25, 2007. It has been updated.

Urban Outfitters was the one that got away from Todd Wenning. He owns shares of Procter & Gamble. Paychex is a Motley Fool Income Investor and Inside Value recommendation. Staples and Aflac are Motley Fool Stock Advisor selections. The Fool owns shares of Procter & Gamble and has a disclosure policy.