It's time once again to play the role of lab rat and win some cheese: Which investment yielded the biggest gain over the past five years?

  1. Software giant Microsoft (NASDAQ:MSFT)?
  2. Top media company Time Warner (NYSE:TWX)?
  3. Or retailer Sears Holdings (NASDAQ:SHLD)?

If you answered Microsoft or Time Warner, you get a mild electric shock and a trip back to the cage. If you sensed a trick question or happened to be the astute investor who picked Sears Holdings, a nice chunk of cheddar awaits.

When boring is better
In the current economy, where even top retailers like Best Buy (NYSE:BBY) are being summarily punished, investors may not expect Sears to be a winning investment. But even with shares falling significantly in the past year, Sears Holdings has still rewarded investors who bought five years ago with a 51% return on their money.

Meanwhile, the dividend that Microsoft continues to pay from its immense cash flow hasn't kept investors in the black -- even with the dividends reinvested, investors are looking at a 3% loss.

And Time Warner's AOL unit continues to be a big drag on earnings; the struggling online arm is still seeing declines in ad revenue at the same time Google (NASDAQ:GOOG) and other peers are experiencing growth. Overall, Time Warner has lost 40% over the past five years.

Examining five-year returns is purely backward-looking, of course, but the point is that the most popular or glitzy stocks aren't necessarily the best investments. Often, investors equate popularity and glamour with great returns, but expensive prices on popular stocks mean this mind-set can backfire.

Sniffing out the good cheese
The notion that investors have a better chance of finding killer stocks where few people go looking is not new. I hear it preached a lot from longtime Fool analyst Bill Mann and his team at the Motley Fool Hidden Gems small-cap service. The Hidden Gems team has singled out several big winners operating in mundane yet profitable niches such as phosphate production, oven manufacturing, and chicken farming.

And if you're still not convinced that there's big money in the boring, here are three examples that show how less tantalizing stocks can post unusually strong returns -- even in a bleak economic climate.

1. j2 Global Communications (NASDAQ:JCOM) has shown that even aging technologies can be transformed into cash cows. j2 Global has brought facsimile technology, a core part of its business, into the 21st century by delivering faxes via the Internet. The company offers a suite of unified communications solutions to companies of all sizes -- including voice, email, conferencing, and virtual PBXs.

While the company has seen usage of its services drop -- particularly from clients in the real estate and financial sectors -- efficient operations helped earnings grow faster than revenue in 2007, with sales up 22% and net income higher by 29%. Even after a big drop recently, the stock has returned investors 25% over the past five years.

2. Hurco (NASDAQ:HURC) is proof there's profit in the less-exciting sectors. The Motley Fool Hidden Gems recommendation makes computer-controlled machine tools that businesses rely on for accurate machining of complex parts. Hurco has managed to pay down its debt while growing the top line at a 20% annual clip for the past five years. As a result, Hurco has returned investors a handsome 535% over the past five years.

3. National Healthcare is a sleepy company in the quiet industry of long-term care. Founded in 1971, National Healthcare operates nursing homes, assisted-living centers, and home care programs for the elderly and sick. While revenue growth is tepid at less than double digits, efficient management at this company has translated into healthy bottom-line growth and cash flow generation. Net income grew 24% in 2007 -- part of the reason investors have seen a 148% return on their money over the past five years.

Get in the know
Little-known, well-run companies such as Healthcare Services Group and other small-cap companies have been hammered lately. But picking up a fundamentally sound -- and small -- gem on the cheap can do wonders for your portfolio. Go hunting for them in the market's more mundane sectors, and you can get boring to work for you.

If you'd like a little help getting started, click here to join Hidden Gems free for 30 days, and check out which small-cap stocks the team recommends for big profits from new money today.

This article was originally published on June 27, 2006. It has been updated.

Fool contributor Dave Mock runs the rat race every day, but he rarely gets the cheese. He owns no shares of companies mentioned here. j2 Global is a Motley Fool Hidden Gems Pay Dirt recommendation. Sears Holdings, Microsoft, and Best Buy are Inside Value selections. Google is a Rule Breakers pick. Best Buy is a Stock Advisor recommendation. Hurco is a Hidden Gems choice. The Fool owns shares of Best Buy. The Motley Fool has a disclosure policy.