It's been a tough go recently for shareholders of Whole Foods Market (NASDAQ:WFMI), JDSU (NASDAQ:JDSU), and Imclone Systems (NASDAQ:IMCL). Each one of these stocks is down more than 10% since the beginning of May.

Heck, we both own shares of Whole Foods, and we're positively fuming about the FTC interference in the proposed Wild Oats (NASDAQ:OATS) merger. But we don't know pain ...

Meet the market's most infamous stocks
A while back we asked this question: What were the 10 best stocks of the past 10 years, and what could we learn from them? We discovered that the 10 best stocks of the past 10 years were:

  1. Obscure.
  2. Ignored.
  3. 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.


Return, 1997-2006

1997 Market Cap (in millions)







Gilat Satellite Networks (NASDAQ:GILT)



Technology Solutions





PLC Systems






ESS Technology  



Danka Business Systems






Data provided by Capital IQ, a division of Standard & Poor's. It should be noted that past performance does not predict future performance. *HKN was formerly known as Harken Energy. ** (WWWW) was formerly known as Interland (INLD).

Now that's some shareholder pain.

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 if you keep looking down the list, that's a trait that keeps showing up.

But this also makes sense: Small companies offer the greatest risks and greatest rewards 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.

Tim Hanson and Brian Richards both own shares of Whole Foods. Whole Foods is a Motley Fool Stock Advisor recommendation. No Fool is too cool for disclosure.