Monday's Biggest Stock Stars

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

Without further ado:

There's a reason I selected notable five-star gainers, as opposed to other big-name winners making noise on Monday, like low-rated American International Group (NYSE:AIG): 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, 97% of the 181 CAPS All-Stars who've rated Secure Computing have a bullish opinion of the stock.

In April, CAPS member themogle helped our community feel secure about the small-cap stock: "If the cash flow figures are maintained, the growth projections aren't smoke, and the lawsuits don't get them hamstrung, then [Secure Computing] is a long-term winner. Although five plus years was chosen for outperforming the S&P, it will likely be eaten by a bigger fish before then."

Just as themogle predicted, shares of Secure Computing surged yesterday, after McAfee (NYSE:MFE) agreed to buy the network-security provider for $465 million -- a 23% premium to Friday's close.

The bullish lesson?
Always think like a business owner. All sorts of noise can depress a stock's price in the short term, but true investors are able to focus on the factors that really count over time. By buying into small-caps with leading technology and huge market potential, at depressed prices, you give yourself plenty of "upside" opportunities to earn an outsized return -- including a buyout by the big boys.

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

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

Yesterday's drop in five-star stock Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) may have caught our community off guard, but one-star stocks are fully expected to fall hard: Since CAPS started, one-star stocks have dropped by an average of 11.4%, annualized.

Did CAPS call the fall?
On Sunday, for instance, CAPS member anchaknew predicted that the pain was only beginning for Standard Pacific: "Govt intervention I can understand ... question is will it make buyers come flocking into the market? I don't know -- but my bet is in reality it'll take some time to settle this -- the obvious winners are the Banks (mostly the Wall St variety) -- both regionals and shaky builders have problems ahead of them."

Exactly as anchaknew had warned, shares of Standard Pacific, along with several other one-star homebuilders, plunged yesterday on concerns about how the government's plan would affect the still sickly mortgage market. 

The bearish takeaway?
As CAPS' anchaknew demonstrates, pay attention to risk and effect in its totality. In investing, things almost never happen exactly as you'd expect, so it's important to look at as many angles as possible. As Charlie Munger once wrote, "The consequences have consequences, and the consequences of the consequences have consequences, and so 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!