Wednesday's Biggest Stock Stars

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

Company

Yesterday's % Gain

Lundin Mining

37.73%

Silver Standard Resources (Nasdaq: SSRI  )

31.85%

Silver Wheaton (NYSE: SLW  )

25.09%

Kinross Gold (NYSE: KGC  )

22.03%

Yamana Gold (NYSE: AUY  )

16.14%

There's a reason why I selected notable five-star gainers, as opposed to other big-name winners making noise on Wednesday, like low-rated casino stocks Las Vegas Sands (NYSE: LVS  ) and MGM Mirage. Stocks go up all the time, but unless you were able to predict the pop, what does it matter?

Our community of more than 120,000 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: In the first 20 months since its inception in late 2006, five-star stocks beat the market by 12 points, annualized.

Written in the (five) stars?
For example, 93% of the 90 All-Star members who've rated Silver Standard Resources have a bullish opinion of the stock. Last week, one of those All-Stars, Vanheezy18, explained why the Canadian miner -- along with another silver company -- seemed like an attractive bet for the long run:

I believe in buying [Silver Standard Resources] and [Silver Wheaton] now. Silver unlike gold for the most part is consumed in electronics (which are being produced now like never before) so if you're in it for the long haul (and I am) look for there to be a huge demand for silver in the next 10-20 years.

Consistent with that call, shares of several five-star silver stocks surged yesterday, as precious-metal prices rallied as the Fed decided to once again cut rates.

The bullish lesson?
Learn to make money in metals. There are plenty of paths to investment heaven, and buying into well-managed, reasonably priced miners of precious metals has historically been an effective hedge against rising inflation, a declining dollar, and general market mania. As long as you're willing to stomach the inherent volatility of precious-metals prices, there may be a silver 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 Wednesday's biggest one-star decliners:

Company

Yesterday's % Loss

VeraSun Energy (NYSE: VSE  )

53.33%

Vocus

24.12%

Sulphco

16.05%

UAL

13.79%

AMR

9.13%

While yesterday's plunge in highly rated Manitowoc (NYSE: MTW  ) may have caught our community off-guard, one-star stocks are fully expected to fall hard: Over the 20 months since CAPS started, one-star stocks dropped an average of 11.4%, annualized.

Did CAPS call the fall?
In May, for instance, CAPS All-Star YeahBuddy79 shared this bearish view on VeraSun Energy:

Is there anything Ethanol Fuel can't do? Oh yeah how about make a dollar. This company is sick. Ethanol is a dream and a dumb one at that. Watering down gas wont save the economy or planet. The amount of crop needed to make Ethanol renders it almost useless. Ethanol alone will not meet the demand for fuel in the United States.

Consistent with YeahBuddy79's skeptical stance, shares of VeraSun lost more than half of their value yesterday. According to the AP, shares slid after "a report surfaced that the ethanol producer is looking into filing for Chapter 11 bankruptcy."

The bearish takeaway?
Don't believe the hype. As CAPS' YeahBuddy79 understands, alternative energy plays like ethanol fuel may sound exciting, but without solid evidence of long-term economic feasibility, it would be tough to classify them as prudent investments. Like Charlie Munger once candidly put it, "Running cars on corn is about the stupidest thing I ever heard of. Our government is under tremendous political pressure [to support corn ethanol], even though it makes no sense."

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!

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


Read/Post Comments (1) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 30, 2008, at 4:51 PM, Shopessmart wrote:

    I personally am sick to death of the one sided ballyhooing that Motley does.

    For weeks, Motley has been saying how attractive AUY is for varying reasons. AUY has crashed this year worst than most miners down nearly 80% at one point last week from its highs in July.

    Recently AUY traded in the very low $3's and all the while we had the cheerleading from the Motley crew. Now, with AUY posting a gain yesterday Motley chimes in and exclaims how right they are.

    Are you fools even watching the stats and comparing AUY to its mid-tier producer peers? If you were, you would see that AUY is underperforming every single mid-tier producer in both pricing and percentage gains.

    In fact, if I want to know when AUY is going to crater, I look for the latest fool story. I am betting that AUY craters tomorrow on your latest self gratifying, shoulder bumping, hand shaking high fives that I am sure you give yourselves every time a stock you cover rises. After all, spending days and days hunkered in the corner while the share prices of the stocks you cover tanks to seek out new 52 week lows needs a good relief from time to time.

    I registered to tell you guys you suck. I own AUY. I bought last week and will sell on the very first sign of weakness. I have owned AUY off and on for over four years. It is a profitable company to be sure but it remains in a market that simply does not care as the dash for cash is the only thing that matters.

    You guys need to take more responsible care of what you write. I sincerely wish that forums such as yours could get sued because like it or not people do invest based on what you write. And you write crap. I am not saying that you should be sued because someone lost money after reading your article and buying an equity, rather you guys should be sued for falsely representing yourselves and "fools". To read an article a reader may think that you are right. But if they compared prices in between articles they could clearly see that you pat yourselves on the shoulders via this on-line rag and then hunker down but fail to warn off people when shares you cover tank day after day.

    You guys suck.

    Ash

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