Our goal at Motley Fool Hidden Gems is to find the best small companies to own for the next three to 35 years. It's a wonderful aim. After all, historical data illustrates that small-cap stocks -- particularly of the value variety -- have substantially outperformed the overall market over the past 40 years.

To optimize our returns, we look to sell our mistakes quickly, hold sound companies for an average of three years, and then, yes, maintain our stakes in the very best of the lot for a quarter-century or more. The best time to sell shares of a truly superior small company is almost never. Selling Starbucks (Nasdaq: SBUX) or Home Depot (NYSE: HD) in the early days after doubling your money would have wound up costing you dearly, since both continued to crush the market as the years rolled by -- despite the recent market woes.

It's been more than six years, and our Hidden Gems cumulative returns thus far remain gratifying, despite a horrendous recent small-cap market. Our recommendations are beating the S&P 500 by an enormous margin. There's no question that we'll have down periods. Recessions can be nasty for small-company stocks. But over time, we expect to outperform the general market by buying and holding onto the next wave of great American companies.

How do we find them? Think Wal-Mart.
One way to find the future greats is to carefully study the major winners from the past. Relatively few of the multidecade superstars are technology companies. And while we don't avoid tech stocks in Hidden Gems, they are a minority of our selections, since we instead favor unloved or underfollowed companies with high-quality management. Our sleepy, boring successes thus far include commercial-oven maker Middleby . But for the ultimate example, think Wal-Mart (NYSE: WMT).

In November 1980, Wal-Mart was trading at a split- and dividend-adjusted $0.16 per share. That's right, $0.16. But let's be clear: The stock was selling at $50 per share then, so it was never a penny stock. We think it's nearly impossible to become a penny stock millionaire -- despite the mischievous title we placed on this article. No, the greatest stocks are those of real companies with real earnings. Because of stock splits, some investors think you'll find the next Wally World while searching among $0.16-a-share stocks. You won't.

So what has Wal-Mart done since 1980, a full decade after it went public?

With the stock trading at $50 as of this writing, it has multiplied more than 300 times in value over the past 28-plus years. A $5,000 investment back then is worth nearly $1.6 million today. That'll clean up a lot of investment mistakes!

But what if we go all the way back to Wal-Mart's IPO in October 1970? The business was valued at a tiny $21.5 million then. That means the stock is up roughly 10,500 times since. That's 28% growth per year, and it would have turned a $5,000 investment into nearly $53 million today.

When the company went public, it raised $4.5 million in cash to pay down debts. No one knew about it. While dozens of analysts flocked to names like General Electric (NYSE: GE) and U.S. Steel (NYSE: X), Wal-Mart was nothing back then, and none of the big boys on Wall Street really cared about it. And that plays right into Hidden Gems' sweet spot. Continued...