Friday's Biggest Stock Stars

Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight Friday's biggest gainers among the stocks with a top rating of five stars.

Without further ado:

The reason I selected the largest five-star gainers, as opposed to other big-name winners making noise on Friday -- such as satellite-radio stocks Sirius Satellite Radio (Nasdaq: SIRI) and XM Satellite Radio -- is simple: Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 76,000 CAPS Fools considers its five-star stocks the most likely to outperform the market. And so far, CAPS has indeed proved its predictive prowess: Over the past year, top-rated stocks have returned roughly 28%.

Written in the (five) stars?
For example, out of the 282 CAPS All-Stars who've rated Indian copper producer Sterlite Industries, just a single one is bearish. Fueled by that overwhelming Foolish support, Sterlite has maintained a perfect five-star rating for the past six months straight.

This bull pitch -- by All-Star MArgersinger late last August -- reflects much of the positive sentiment found on Sterlite's CAPS page:

The demand for its products, given India's rapid growth and burgeoning demand for infrastructure improvements, is simply staggering. Thanks to a recent secondary IPO offering in the U.S., the company's balance sheet is flush with cash. ... On top of that, a recent swoon in the valuations of emerging market stocks thanks to the ongoing credit problems in the U.S. has brought the company's share price below its IPO price and well into bargain territory!

Sterlite Industries has risen an almost unbelievable 91% since that call just three months ago.

The bullish takeaway? Indian stocks, in general, represent some of the most attractive opportunities in the world. But if you can find an Indian company that has a war chest full of cash, is directly levered to infrastructure growth, and has "busted" IPO bargain features to boot, the results can be explosive.

And now for the losers ...
Of course, winning isn't everything in the stock market.

Here are Friday's biggest one-star decliners:  

One-star stocks inspire the least confidence from our CAPS players. So while Friday's drop in five-star stock NVIDIA (Nasdaq: NVDA) may have caught our community off-guard, one-star stocks are fully expected to fall hard. Over the past year, CAPS' lowest-rated stocks dropped an average of 16.6%.

Did CAPS call the fall?
For instance, on Nova Biosource, CAPS All-Star TheGarcipian said last July, in response to a bullish Fool, "I'm all for biodiesel companies to gain a strong foothold in the energy markets, but when a company is (currently) only able to produce 80,000 gallons (yes, gallons, not barrels) a year, that's not much product with which to bring in sales, which explains their poor revenue, which is less than one-tenth of their market capitalization, which is why I'd stay away from them until they were much more proven."

The Houston-based biodiesel provider is down 43% since TheGarcipian made that call, and it's off 60% from the highs it hit last February.

The bearish lesson? Without a proven track record of success, all you're paying for is potential. Even worse is if the stock price already reflects that promise: You probably won't get compensated enough -- if at all -- for the massive risks involved. Investing is all about the odds, and bets on speculative high-priced stocks are about the worst you can make.

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, and start participating. It's absolutely free -- and a lot of fun!