Tuesday's Biggest Stock Stars

We at The Fool usually don't always pay attention to day-to-day price gyrations. We prefer to track each business' intrinsic value, which changes less frequently than Mr. Market's wild swings would have you believe.       

But there are times when price moves are so big that investors should take notice -- particularly when we Fools could have seen them coming.  

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

Without further ado:

Did CAPS predict the pop?
The reason I selected the biggest five-star gainers, instead of the market's biggest overall winners or even the most actively traded stocks -- like Microsoft (NASDAQ:MSFT) and Level 3 Communications (NASDAQ:LVLT) -- is simple: Stocks go up all the time, but unless you were able predict the pop correctly, 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, Gildan Activewear, a Montreal-based provider of wholesale apparel, has always received tremendous support from our community. The stock has maintained its five-star rating for the past six months straight, and it's been named one of CAPS' Top 10 Consumer Goods Stocks. 

This pitch, written by CAPS player jmayas, helps us understand why:

Superior operational capabilities. Will leverage its competitive edge into new product such as socks -- a potential $100 - 300mm in revenues for the company with just a 5-10% share of the market. Will also attempt to create a brand around the Gildan name to make a foray into retail. ... Fantastic management team, high insider ownership.

Gildan is up 42% since that pitch was written back in August 2006. In fact, yesterday's 13% jump came after Gildan announced the purchase of sock maker V.I. Prewett & Son for $125 million.

The Foolish takeaway? Know exactly what type of strategy -- low-cost, acquisition, differentiation, etc. -- your company intends to use to create long-term shareholder value. If the strategy makes complete sense, is feasible, and you trust in management's ability to execute, chances are you're sitting on a winner.

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

Here are yesterday's biggest one-star decliners:   

Did CAPS call the fall?
Fools believe five-star stocks will outperform, while 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 Journal Register underperform pitch found in CAPS:

Journal Register DOES seem to be focusing more on local and regional news than many of its competitors are, but is it enough? And are the company's readership markets getting edged out more and more by online and television ventures? The sentimentalist in me wants to see this company (and newspapers) succeed. But I'm afraid that any overhauls JRC might make will be too little, too late.

The Pennsylvania-based newspaper publisher is down a staggering 63% since CAPS All-Star TMFLucky11 penned that pitch back in October 2006. Specifically, yesterday's price plunge came after JRC announced a 9.6 drop in advertising revenue -- yet another sign of the company's, along with the entire newspaper industry's, progressive decline.  

The bearish lesson? Stay away from (or anything resembling) a buggy whip. 

The final Foolish move
Investors often focus strictly on stock price movements (or the 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!