Thursday's Biggest Winners and Losers

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

Without further ado:

Company

Yesterday's % Gain

Metalico

11.61%

Yamana Gold (NYSE: AUY  )

8.82%

Southern Copper (NYSE: PCU  )

7.13%

ConocoPhillips (NYSE: COP  )

5.19%

Petroleo Brasileiro (NYSE: PBR  )

4.65%

There's a reason I selected notable five-star gainers, as opposed to other big-name winners making noise on Thursday. Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 115,000 CAPS Fools considers its five-star stocks the most likely to outperform the market. And so far, CAPS has indeed proved its market-beating prowess: Since its inception in 2006, five-star stocks are beating the market by 12 points, annualized.

Written in the (five) stars?
For example, out of the 688 CAPS All-Stars who've rated Yamana Gold, an overwhelming 98% have a bullish opinion.

Just last week, CAPS member holdem83 even helped our community go for the gold:

Gold is currently on the low, with the stock dropping 40% because of it. However, with the global slow down, the banks still trying to cope with their losses and a possible rate cut this year, gold is still a cheap commodity. The company doubled its growth, income and production from last year, and the stock is almost at half price from its all time high. This stock is the best gold position you can play.

Consistent with that call, shares of Yamana surged yesterday after a Wall Street analyst upgraded the stock, citing "attractive entry points" for many gold stocks -- exactly as CAPS' holdem83 had argued.

The bullish lesson?
Don't give up on the gold just yet. There are plenty of paths to investment heaven, and buying into high-quality, reasonably priced gold stocks has historically been an effective hedge against inflation, oil shocks, and market downturns. As long as you're willing to stomach its inherent volatility, there may be a gold lining out there for you, too.

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

Here are five of Thursday's biggest one-star decliners:  

Company

Yesterday's % Loss

salesforce.com (NYSE: CRM  )

18.45%

US Airways (NYSE: LCC  )

9.45%

UAL

8.63%

MBIA (NYSE: MBI  )

8.20%

VeraSun Energy

6.37%

One-star stocks inspire the least confidence from our CAPS members, and for pretty good reason: Since CAPS started, one-star stocks have dropped an average of 11.4%, annualized.

Did CAPS call the fall?
Two weeks ago, for instance, CAPS member SwordAgain shared a few bearish concerns over salesforce.com:

I love the company because of its tremendous record of management and execution. The one thing that worries me is that they may show the slightest stumble. So this thumbs down is based on my risk assessment. It is too likely to happen given the economic environment. I'd rather down thumb it now and wait a bit for a retraction before climbing on as a thumbs up.

In line with that call, shares of salesforce.com plunged yesterday on worries that the Internet software service's growth is indeed slowing amid the economic troubles -- exactly as SwordAgain had warned.

The bearish takeaway?
With enough exuberance, good businesses can quickly turn into bad stocks. Therefore, one of the most important jobs you have as investor is to determine whether the growth assumptions built into a stock are justified. As CAPS' SwordAgain understands, there are many great companies out there, but if a stock is priced for absolute perfection, it's likely just a matter of time before your rocket stock "turns torpedo."

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!

Petroleo Brasileiro is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletter services, free for 30 days.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool's disclosure policy is always the big winner.


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