Monday's Biggest Stock Stars

Here at the Fool, we don't usually pay attention to day-to-day price gyrations. Instead, we prefer to track the intrinsic value of a business, which, by its very nature, changes a lot less frequently than Mr. Market's wild swings would have you believe.       

But some price moves are just so big that investors should at least take notice -- especially when we Fools could have seen them coming.  

The big winners
With that in mind, I've used our Motley Fool CAPS community to highlight yesterday's biggest gainers among the stocks boasting CAPS' top rating of five stars. Also, I've included a possible explanation -- where I could find one, of course -- for each move.

So, without further ado:

Did CAPS predict the pop?
The reason I selected the biggest five-star gainers, as opposed to the market's biggest overall winners, is simple: Stocks go up all the time, but unless you were able to predict the pop beforehand, what does it matter?    

Through a consensus of more than 65,000 Fools in CAPS, our community considers its five-star stocks the most likely to outperform the market. By reverse-engineering some of the arguments made for these picks, our odds of finding the next big winner will surely improve.

For example, VASCO Data Security, an Illinois-based developer of security software, has had more than its fair share of CAPS support, with more than 620 players bullish about its future. VASCO's CAPS page is littered with outperform arguments that center around its high insider ownership, soaring growth rates, and solid competitive position within the e-security space.    

Some pitches go back even further than a year, like this one penned by my Foolish colleague Tim Beyers (a.k.a. TMFMileHigh):

What many forget is that 90% of VASCO's business is overseas, which means it is zigging exactly as larger rivals such as RSA (soon to be a part of EMC) are zagging. Plus, the firm has a history of blistering returns on equity, high insider ownership, and 40-50% sales growth. I attribute that performance to VASCO's position; it specializes in selling online banking authentication to financial institutions that haven't a clue about how to lock a digital safe on behalf of users.

The stock has returned a massive 277% since that call, and is up 78% since Tim featured the stock six months later in April. If that wasn't prescient enough, VDSI is up 50% since Tim wrote about it again last June.

The Foolish takeaway? Just because a stock has had a huge run, that doesn't necessarily mean it's expensive. As another sharp Fool, Rick Munarriz, says, "Priced for perfection is a myth." As long as the story stays awesome, growth stocks can often go higher (and for a lot longer) than many investors think -- especially when they're small caps to begin with.

Now for the losers
Of course, winning isn't everything in the stock market. Stocks go down, too -- oftentimes very, very fast.

Here are yesterday's biggest one-star decliners:   

Did CAPS call the fall?
Whereas Fools believe five-star stocks will outperform, one-star stocks inspire the least confidence from our CAPS community. By investigating a few of the bearish arguments made for these losers, we should have a better chance of averting portfolio disaster in the future.   

Take, for instance, this short but very to-the-point BearingPoint underperform pitch found in CAPS:

Lagging its competitors and management is doing all it can to sink this company. Restating financials costs the company.

BearingPoint is down a depressing 45% since CAPS All-Star chlear27 penned that pitch in November. chlear was clearly referring to BearingPoint's issues with the Supreme Court of New York, which ruled last September that BE was in default on some of its debt (because of a delay in filing regulatory reports). As it turns out, several analysts lowered their earnings forecasts yesterday, with one of the reasons being the higher costs associated with BE's restatements. You know, just like chlear warned us Fools last year.   

BearingPoint's plummeting price reminds us that -- out of the several red flags we should always look out for -- noncompliance with the SEC is probably the most obvious sign to steer clear.   

The final Foolish move
Investors often focus strictly on stock price movements (or their results), without realizing that developing a proper stock-picking process counts most.

Over at Motley Fool CAPS, thousands of investors are Foolishly sharing insightful investment tips to help identify tomorrow's big movers. Over time, consistently reverse-engineering winning (and losing) stocks will help you become a more Foolish investor.

Log in to CAPS today. It's absolutely free -- and a lot of fun!