The Next Home Run Stock

I assume that you, like everyone and his Aunt Audrey, would love to find the next Wal-Mart (NYSE: WMT  ) -- to dig out the market's most precious small companies. Back in October 1977, Wal-Mart traded at a split- and dividend-adjusted price of $0.05 per share. Today, it trades for around $56. In a little more than 30 years, Wal-Mart has turned a $5,000 investment into more than $5 million.
Of course you'd love to buy the next Wal-Mart.
But you'd prefer not to take on extreme risk, right?
I think you're smart to think that way. So do a host of great money managers -- from Peter Lynch to Seth Klarman, Bill Miller to Charles Royce. They've all searched for small companies with a mixture of sales and free cash flow growth, superior returns on invested capital, heavy insider ownership, and healthy assets -- all at a reasonable price.