I've seen this list of the past decade's top-performing stocks so many times, I can recite most of them from memory. But there's good reason to keep picking apart these top performers: Any one of them had the potential to turn a mediocre portfolio into a market-beater.

Here's a peek at 10 of the top 25 performing stocks of the past decade:

Company Price Change Jan. 1, 2000,

to Jan. 1, 2010 Bally Technologies 5,975% XTO Energy 5,917% Southwestern Energy 5,776% Clean Harbors 4,669% Deckers Outdoor 3,775% Jos. A. Bank Clothiers 3,196% Range Resources 2,246% FTI Consulting 2,022% CarMax 1,997% Terra Industries 1,960%

Source: Capital IQ, a Standard & Poor's company.

The list may look pretty familiar. But you may not know that these companies, and many of the decade's other top performers, share a dark secret.

Small and powerful

All of these companies are small, and all have absolutely beaten the pants off large, well-known stocks like Costco (Nasdaq: COST) and Boeing (NYSE: BA) , which returned 30% and 31%, respectively, over the past decade.

That's not to say that you should avoid bigger companies. In fact, both Costco and Boeing could produce good returns. Costco is now the world's eighth-largest retailer and has done that by building a loyal base of dues-paying members (customers) -- 56.9 million of them -- and plunking down its massive warehouses in high-growth areas like China. With 414 stores in the U.S. and a mere 77 in China, it certainly seems like there's plenty of room for the company to grow.

Meanwhile, Boeing is expected to post some startling bottom-line growth over the next two years. Analysts see the aviation giant more than doubling earnings in 2010 and then tacking on another 24% in 2011.

However, we're not looking for investments with good returns here; we're looking for the best returns. So we're going to stick with the smaller companies. But small size isn't exactly a dark secret.

So what's that dark secret?!?!

Let's take another look at the companies listed above. See whether you can figure it out:

Company Price Change Jan. 1, 1998,

to Jan. 1, 2000 Return on Equity

in 1999 Debt to Equity

in Early 2000 Bally Technologies (84.1%) Unprofitable Negative book value XTO Energy (45.5%) 19.5% 340.8% Southwestern Energy (49.0%) 5.3% 140.5% Clean Harbors (20.0%) Unprofitable 230.2% Deckers Outdoor (65.0%) 5.3% 14.6% Jos. A. Bank Clothiers (44.2%) 3.2% 35.9% Range Resources (80.4%) Unprofitable 417.5% FTI Consulting (60.0%) 2.9% 206.7% CarMax (74.3%) Unprofitable 62.2% Terra Industries (88.0%) Unprofitable 77.7%

Source: Capital IQ, a Standard & Poor's company.

What would you say ties all of these top-performing companies together?

If you said something to the tune of, "They looked like terrible investments," then you get a gold star. Even a quick glance at that chart would send chills up the spine of most fundamentals-oriented investors. Many of the companies were unprofitable, the ones that weren't produced lackluster returns on capital, and quite a few were swimming in debt.

Maybe it's not so surprising, then, that the market hated these stocks at the time. Those are some massive declines posted above, and bear in mind that this was over a period when the S&P jumped more than 50%.

There are certainly companies out there today that could fit a similar bill. CapitalSource (NYSE: CSE) , USG (NYSE: USG) , and Manitowoc (NYSE: MTW) have all seen their stocks fall significantly over the past two years. And within those companies, we can find plenty of unprofitability and debt.

But there's a case to be made for each of these beaten-down stocks. With a current price-to-tangible-book multiple of 0.81, it's obvious that investors think that more losses are ahead for CapitalSource. But if the economic recovery continues to take hold, this commercial lender may start to see fewer loans go sour. The housing market has put quite a beating on USG, but with industry-leading products like Sheetrock and Durock, the company has the potential to slingshot back into the black as that market starts to find its footing. Manitowoc has similarly been slammed by the construction slowdown, but the company's hefty fixed expenses -- notably a huge debt load -- mean that even a moderate revenue recovery could have a significant impact on the bottom line.

Will these companies end up on the list of the next decade's top performers? Time will tell. For now, we can say that the ugly financials these three are showing today make them look a lot like the past decade's top performers, back when they started their own runs.

Time to scrap everything we know?

But does this mean we should forget about looking for high-quality companies trading at reasonable prices, in favor of rummaging in the garbage bin? I don't think so.

According to Capital IQ, 667 publicly traded companies with market caps greater than $10 million filed for bankruptcy protection over the past decade. In 2000, only 22 of those companies could claim a return on equity greater than 15%, and debt-to-equity below 50%. The rest of the companies that went belly-up sported numbers that looked a lot like those in the chart above.

In other words, taking fliers on companies with ugly looking financials could land you a massive winner, but it also gives you a big chance of taking hefty losses.

Swing at good pitches

By sticking to investing in reasonably capitalized and solidly profitable companies that are trading at attractive prices, we vastly reduce the chances of sticking ourselves with clunkers headed toward bankruptcy, and we can still end up bagging some of the very best performers. Green Mountain Coffee Roasters and Hansen Natural, for example, both would have fit a "high-quality at a reasonable price" strategy back in 2000, and they returned 9,211% and 7,024%, respectively, in the decade that followed.

What do these companies look like? Well, they look a lot like Under Armour (NYSE: UA) and Diana Shipping (NYSE: DSX) . Like the three companies mentioned above, Under Armour and Diana Shipping could have a bright future ahead of them. For Under Armour it's all about bringing its performance athletic gear to competitors all over the world. For Diana, success is leveraging the global need for commodities like iron ore, coal, and grain to keep its shipping assets in action.

But when it comes to the financial statements, Under Armour and Diana are very different from CapitalSource, USG, and Manitowoc. Both are nicely profitable, conservatively capitalized, and have exhibited significant growth over the past five years. In other words, we don't have to hope that they'll deliver strong financial performance. They already do.

And these aren't the only small companies with solid financials that could deliver big gains over the next 10 years. The investment team at Motley Fool Hidden Gems focuses solely on finding small, promising stocks that the rest of the market has overlooked. Just this month, the team dug up a big player in the messy business of dealing with radioactive materials.

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This article was originally published March 25, 2010. It has been updated.

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. Costco Wholesale, CarMax, and USG are Motley Fool Inside Value recommendations. Green Mountain Coffee Roasters, Hansen Natural, and Under Armour are Motley Fool Rule Breakers picks. Costco Wholesale is a Motley Fool Stock Advisor recommendation. Under Armour is a Motley Fool Hidden Gems selection. The Fool owns shares of CapitalSource, Costco Wholesale, Under Armour, and XTO Energy. The Fool's disclosure policy assures you that no Wookiees were harmed in the making of this article.