Pop quiz, hot shot. Name the company that's most likely to be a 10-bagger by 2020.

It's a hard question. There isn't just one correct answer -- you can find three candidates here -- but it's easy to weed out some popular incorrect answers. 

If you named Cisco (Nasdaq: CSCO), Johnson & Johnson (NYSE: JNJ), Kentaco Fried Hut parent Yum! Brands (NYSE: YUM), or any other large-cap company, you're probably wrong. They're simply too big to grow tenfold in the next decade. My Foolish colleague Tim Hanson has shown year in and year out that a decade's biggest winners are small-cap stocks.

He found that the largest grower of the last 10 years, beverage company Hansen Natural , was almost a 50-bagger. Even at 50 times its original market capitalization, Hansen is a $3 billion company -- one-fifth the size of Yum Brands, a fortieth the size of Cisco, and a fiftieth the size of Johnson & Johnson.

It gets better
Besides having room to grow, small caps have another hidden feature. They are more volatile than their large-cap brethren. This can lead to fluctuations that are absolutely heartbreaking for investors with low risk tolerances. But for those of us with higher risk tolerance, the volatility provides opportunity.

As we've seen recently, large-cap stocks can be quite volatile, too. When their price losses significantly outstrip the market's, though, there's usually something terribly amiss.

Familiar examples abound. Take the gambling industry and former large caps MGM Grand (NYSE: MGM), Las Vegas Sands (NYSE: LVS), and Wynn (Nasdaq: WYNN). If they recover, each could be a multibagger from here. However, they're all priced at fractions of their former highs because their balance sheets weren’t built for a gambling environment crippled by a faltering economy.

Meanwhile, small caps are a little different. Sometimes, as in the case with Boyd Gaming (NYSE: BYD), small caps are down for a reason. But, since they tend to have greater volatility than the market as a whole, sometimes they experience dramatic stock price tumbles on very little news. Or even on relatively good news.

A quick example
Take the recent case of restaurant company Buffalo Wild Wings . Back in late October, it reported quarterly earnings that were disappointing. But given the state of the economy in general and the restaurant sector specifically, the results were downright robust: positive earnings-per-share growth and impressive same-store sales growth (6.8% at company-owned stores). Continued...