It’s often assumed that the deck is stacked against individual investors like you and me. And to a certain extent, it is. The big investment houses such as Goldman Sachs have their tentacles in all kinds of businesses, so they get a first reading on the direction of the economy before we’re ever able to. They can exchange shares lightning-quick with high-frequency trading, profitably skimming fractions of pennies off the top of every trade.

But, amazingly, these are some of the few advantages that such institutions have. In its very structure, Wall Street perpetuates gross inefficiencies, leaving pockets of immense opportunity for enterprising individuals. In fact, as individuals we have much greater opportunities, because we can buy the high-growth stocks that Wall Street can’t touch .

You can outperform

Finance heavyweights Eugene Fama and Kenneth French discovered that every year, 1 in 8 small-cap growth stocks becomes large. According to these researchers, such soon-to-be large companies return up to 62% annually on average.

You would think Wall Street would have its hooks all over these stocks, quickly driving profits away, but the large funds are mostly unable to touch these stocks. Because they have so much capital, they have to focus on only the biggest and most liquid names, such as Bank of America. Citigroup. and Microsoft. which can trade hundreds of millions of shares per day.

Surprisingly, even mutual funds focused on small companies often are unable to cash in on the big gains offered by these hidden gems.

Why?

It’s the so-called institutional imperative. Just as these stocks are about to hit the big time and score fat returns, small-cap funds usually have to dump them. The funds are often legally obligated to maintain a focus on small caps and typically can hold only a few larger stocks. That’s the kind of inefficiency that leaves a gaping opportunity for individual investors. Because that inefficiency is consistently structured into the institutional system, it offers a reliable opportunity to find the home run stock of the next decade .

Consider the example of T. Rowe Price’s New Horizons fund, which is focused on rapidly growing small caps. In 1970, the fund had picked up shares in the recent debut Wal-Mart ( NYSE: WMT ) debut. Of course, the retailer grew like gangbusters, and by 1983 it had outgrown its small-company classification. Now, the rational approach would be to hold on to (or even buy more of) such a hot prospect, but what did the fund do because of its institutional imperative?

It sold, of course. If the New Horizons fund had simply held its shares, they would now be worth $14 billion, or twice the current value of its entire portfolio! Of course, today Wal-Mart is so huge that it simply doesn’t have the same ability to grow; recent quarters show a retailer that is struggling to produce positive same-store sales, a key metric for the sector. But that wasn’t true at the time New Horizons had to sell.

Individual investors are not forced to sell just because a company grows too large, and that’s one of our key advantages as individual investors. That may seem like a tiny edge, but when you can find rapidly growing small caps, it’s a huge leg up, as an accidental millionaire could tell you.

Grow to the sky

Wal-Mart’s not just some one-off example, though. The only place to find such super growth is in the market’s undiscovered stocks. Look at how a few stellar small caps have performed in the past decade: