Monday's Biggest Stock Stars

We at the Fool usually don't pay attention to day-to-day price gyrations. We prefer to track each business' intrinsic value, 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 summoned our Motley Fool CAPS community to highlight yesterday's biggest gainers among the stocks with a top CAPS rating of five stars:

Why did I select the biggest five-star gainers, as opposed to the market's biggest overall winners, or volume leaders such as Sirius Satellite Radio and Home Depot? It's simple: Stocks go up all the time. But unless you were able predict the pop, what does it matter?    

Did CAPS predict the pop?
Our CAPS community of more than 65,000 investors considers five-star stocks the most likely to outperform the market. By reverse-engineering some of the arguments our CAPS participants have made for these picks, we can increase our odds of finding the next big winner.  

For example, more than 300 CAPS All-Stars have called "outperform" on Excel Maritime Carriers, compared to a mere three All-Star bears.

This outperform pitch -- pulled from Excel's CAPS page -- gives us an idea of why it's been so Foolishly attractive:  

Great P/E. It may take a while for everyone to notice this one, but according to my favorite master investor, Peter Lynch, that is a good thing. Get in now while it's small. Global economy (growth) will help while management is righting the ship (pun intended, sorry).

Since woodententmaker made that call back in December 2006, EXM has returned a remarkable 361%.

The bullish takeaway? It pays to stay small. Just like our team over at Motley Fool Hidden Gems -- whose stock picks are up 65%, against the S&P's 27%, since inception -- if you buy into superior small caps at attractive prices, you'll repeatedly find it to be a potent combination.

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

Here are yesterday's biggest one-star decliners:   

Did CAPS call the fall?
One-star stocks inspire the least confidence from our CAPS community. By investigating a few of the bearish arguments our CAPS participants have made for these losers, we'll have a better chance of averting portfolio disaster in the future.   

Take, for instance, this Convera underperform pitch found in CAPS:

Continual losses on the income statement coupled with continual negative operating cash flow -- add in a highly competitive industry dominated by much deeper-pocketed players, and I'm led to one conclusion. Underperform.

The Virginia-based business-software company is off a slight 5% since legendary TMFEldrehad penned that pitch a few weeks ago, but it's down 37% year over year.

The bearish lesson? In its simplest form, investing is all about putting cash up front today to get more of it back tomorrow. But if a company perpetually burns cash -- meaning that its owners are essentially losing money, too -- it's only a matter of time before the stock starts to reflect those losses.    

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!