The correct answer is      (B.) Small-cap value stocks.

Investors who purchased a diversified basket of large-cap growth stocks -- stocks with high market capitalization and a high price-to-book ratio -- would have earned an average annualized return of about +8.8% between June 1926 and the end of February this year. Meanwhile, small-cap value investors earned an average annualized return nearly +5% higher.

If that margin sounds too small to be important, think again -- just $100 invested in small-cap value stocks back in 1926 would be worth nearly $2.8 million today compared to just $104,000 for large-cap growth names. And the ability of small-cap value stocks to outperform is still prevalent today.

Of course, the volatility of returns for small-caps is higher than for large caps -- some of this excess return can be explained by the fact that investors are taking on more risk buying small caps. But the risk isn't as high as one might expect. Since 1979, the S&P 500 has experienced a total of six down years. In all but one of those years, the Dow Jones Wilshire Small-Cap Value Index has outperformed the broader market. The average outperformance: +9.3%.

Small caps even offered investors a shot at impressive gains in 2008, the worst year for the S&P 500 since the 1930s. Consider that more than 100 of the 600 stocks in the S&P 600 Small-Cap Index actually traded higher last year compared to just 25 stocks within the S&P 500. The average gain for S&P 600 stocks that traded higher was more than +15%, not bad for the worst year since the Great Depression.

The obvious question is why would small-cap value stocks so handily outperform all other asset classes? There is no single, correct answer, but some of the more popular explanations include the idea that market valuations for small caps are less efficient, that the takeover potential (and thus short-term gain potential) is higher, and that the smaller firms often compete in industries where there is more room to grow.

With these points in mind, now might be a good time to prospect for small-cap value stocks. The group offers plenty of opportunity for strong gains even if the market remains weak. And when the market does recover, history suggests that these plays will handily outperform the major averages.

That's why StreetAuthority editor Paul Tracy profiles two promising plays in the small-cap value category in his latest issue of the Market Advisor newsletter. Paul's picks are solid players in their respective industries, sport healthy projected EPS growth rates, and are well positioned to take advantage of increased demand. At less than $30 a share, these stocks are two you can't afford to ignore. To learn their names, and to learn more about the Market Advisor newsletter, please visit this link.