$725

1,118%

Range Resources (NYSE: RRC)

$444

654%

Ultra Petroleum (NYSE: UPL)

$1,411

323%

Hologic (Nasdaq: HOLX)

$301

264%

Arcelor Mittal

$857

214%

Data provided by Capital IQ, a division of Standard & Poor's.

Simply put, the smallest companies have much more upside than the largest. But be aware: Higher potential reward comes with higher risk. Buy one of the worst-performing small caps, and you'll likely earn a total loss of capital -- which is a fancy Wall Street phrase for "losing all your money." That's why at Hidden Gems, we seek only the highest-quality small caps: those with high insider ownership, a strong balance sheet, a solid business model, and compelling valuation.

It's time to think small
Using these principles, the HG team's stock recommendations have outperformed the S&P 500 by an average of five percentage points since the service began more than five years ago. This track record shows that small caps can indeed improve returns, and should be a part of any balanced portfolio.