Wednesday's Biggest Stock Stars

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

Without further ado:

There's a simple reason why I selected the largest five-star gainers, as opposed to other big-name winners making noise on Wednesday, like one-star auto makers General Motors (NYSE: GM) and Ford. Stocks go up all the time, but unless you were able to predict the pop, what does it matter? 

Our community of more than 94,000 CAPS Fools considers its five-star stocks the most likely to outperform the market. And so far, CAPS has indeed proven its market-beating prowess: Over its first year, top-rated stocks returned roughly 28%.

Written in the (five) stars?
For example, out of the 774 CAPS All-Stars who've rated Motley Fool Rule Breakers pick Suntech Power Holdings, 97% have a bullish opinion. Fueled by that Foolish support, the Chinese solar module manufacturer has kept a four or five-star rating for over six months straight.

Just last week, CAPS player geneo2036 tried to shed some sunlight on the Suntech situation just a few days ago:

[Suntech] is one of the best values in the solar market. It has 50%+ exposure to the European solar market one of the hottest and is a top competitor.

[First Solar (Nasdaq: FSLR)] and [Sunpower] are both decent alternatives- but much more richly priced to the point that any missed earnings not beating high expectations can kill its PEG valuation. [Suntech] is in the end a much more reasonable bet on a risky industry.

Consistent with that call, shares of Suntech surged yesterday after the company announced a major supply agreement with Enneray, a developer and manager of photovoltaic (PV) systems operating in the rapidly growing Italian market.

The bullish takeaway?
Learn to combine the best of both "megatrend" and global investing" strategies. Important emerging industries are notoriously fraught with risk, but by buying into top-dog first movers with inroads into the fastest-growing markets, you can reduce your downside substantially. As CAPS' geneo2036 understood, the best defense is often a strong, hyper-growth offense.

And now for the losers ...
Of course, winning isn't everything in the stock market. Here are Wednesday's biggest one-star decliners:   

One-star stocks inspire the least confidence from our CAPS players. So although yesterday's drop in five-star stock Landec (Nasdaq: LNDC) may have caught our community off-guard, one-star stocks are fully expected to fall hard. In the first year, CAPS' lowest-rated stocks dropped an average of 16.6%.

Did CAPS call the fall?
Back in August, for instance, CAPS All-Star jack21222 shared these bearish thoughts on Dot Hill Systems:   

Sure, they're not in debt... but they're losing money now, they're expected to lose money for the foreseeable future. Furthermore, their revenues are shrinking. Also, they're up against some major competition in the data storage market.

Not surprisingly, shares of the California-based data management provider are down 25% since that call.

The bearish lesson?
To get a feel for a stock, always try to break down the entire picture. With investing, there are tons of quantitative (earnings, balance sheet, etc.) and qualitative factors (economic moat, management, etc.) that need to be considered. If you ever come across a stock like Dot Hill Systems -- whose dismal numbers essentially reflect its weak competitive position -- it's probably best to move on.    

The final Foolish move
Investors often focus strictly on stock-price movements, 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, above all else, 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!