What were the 10 best stocks of the past 10 years, and what could we learn from them? Those were the questions we asked a few months back, and we discovered that the 10 best stocks of the past 10 years were:
- Obscure.
- Ignored.
- Small.
That's all well and good, but then we got to thinking: What were the 10 worst stocks, and what could we learn from them?
Without further ado, here are the 10 worst performers.
|
Company |
Return, 1997-2006 |
1997 Market Cap (In Millions) |
|---|---|---|
|
MDI |
(98.6%) |
$419 |
|
Harken Energy |
(98.3%) |
$276 |
|
Gilat Satellite Networks |
(98.2%) |
$247 |
|
Technology Solutions |
(98.1%) |
$645 |
|
Web.com* |
(97.8%) |
$1,797 |
|
PLC Systems |
(97.3%) |
$370 |
|
Milacron |
(96.3%) |
$872 |
|
ESS Technology |
(96.3%) |
$1,057 |
|
Danka Business Systems |
(96.3%) |
$2,061 |
|
Cytogen |
(95.8%) |
$276 |
*Web.com (WWWW) was known as Interland (INLD) until March 2006.
Danger! Danger!
There are a few caveats. First, these companies are all still in business and trading on major U.S. exchanges. Many publicly traded companies went bankrupt over the past decade, leaving shareholders with nothing. We also excluded companies that did not have a market cap of more than $200 million 10 years ago, to keep penny stocks out of our results.
Those qualifications aside, here's what we can conclude: The 10 worst stocks of the past 10 years were also small. And they were, for the most part, far worse than the worst large caps:
|
Company Name |
Return, 1997-2006 |
1997 Market Cap (In Millions) |
|---|---|---|
|
3Com |
(94.4%) |
$12,467 |
|
Eastman Kodak |
(67.9%) |
$26,743 |
|
Nortel Networks (NYSE:NT) |
(65.4%) |
$16,060 |
|
General Motors (NYSE:GM) |
(44.9%) |
$42,149 |
|
EDS (NYSE:EDS) |
(36.3%) |
$21,040 |
|
Xerox |
(35.6%) |
$17,080 |
|
CA (NYSE:CA) |
(31.7%) |
$18,148 |
|
International Paper (NYSE:IP) |
(15.8%) |
$12,156 |
|
Alcatel-Lucent (NYSE:ALU) |
(10.5%) |
$11,746 |
|
Sara Lee (NYSE:SLE) |
(8.6%) |
$18,023 |
But this also makes sense: Small companies offer the greatest risk and greatest reward in the market.
Separate the baggers from the laggards
It can be difficult to determine which small caps will go on to be the best. That's why, at our Motley Fool Hidden Gems small-cap research service, we search for traits -- like high insider ownership, free cash flow, and dividends -- that we think indicate great long-term investments. Because as Paul Elliott noted recently, the risk with small caps may not be with the companies, but with us as investors! That's because too many of us go chasing after the next big thing at any cost, rather than systematically searching out and finding legitimate small businesses with strong fundamentals trading at reasonable prices.
Foolish conclusion
The 10 best and 10 worst stocks of the past decade were small caps. But they were very different kinds of small caps.
In our Hidden Gems service, we heed the lessons of the best and worst performers in our quest to find the very best small-cap businesses. Click here to see our 60 favorite small companies with a free 30-day trial.
This article was originally published on June 5, 2006. It has been updated.
Neither Tim Hanson nor Brian Richards owns shares of any company mentioned in this article. No Fool is too cool for disclosure.
