Wednesday's Biggest Stock Stars

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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.

Without further ado:

Company	Yesterday's % Gain
Satyam Computer (NYSE: SAY)	50.00%
Navios Maritime (NYSE: NM)	25.79%
Joy Global (Nasdaq: JOYG)	12.58%
Teck Cominco (NYSE: TCK)	11.02%
GigaMedia	9.27%

There's a reason why I selected notable five-star gainers, as opposed to other big-name winners making noise on Wednesday, like one-star stock Macy's (NYSE: M). 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 proven 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, 98% of the 1,077 members who've rated Indian software company Satyam Computer have a bullish opinion of the stock. Recently, one of those Fools, Tutom, commented on the stock's 50% plunge Tuesday on news that it would buy two builders partly owned by Satyam's founder and chairman:

Great opportunity to buy a great company on a blip. If there is a reversal of the purchase decision, [Satyam] will fly. If not, it is still an over-reaction. Think about it, infrastructure in India... Perfect!

Just as Tutom predicted, shares of Satyam soared 50% yesterday after the negative investor reaction spurred the company to indeed cancel its builder buyout plans.

The bullish lesson?
Learn to pounce on Mr. Market's shortsightedness. News-driven plunges in price should always give Fools some pause, but if you truly believe in a company's long-term prospects, points of maximum pessimism are the very best time to buy. As Warren Buffett simply put it, "bad news is an investor's best friend."

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
Plug Power (Nasdaq: PLUG)	18.71%
Hovnanian Enterprises	14.34%
Deutsche Bank	10.72%
Fulton Financial	10.43%
PMI Group	9.36%

While yesterday's drop in highly rated Apple (Nasdaq: AAPL) 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 August 2006, for instance, my Foolish colleague Rich Smith (TMFDitty) made this rather prescient oil-based prediction on Plug Power:

The more I learn about hydrogen fuel cells, the more I am convinced this is a pipe dream technology -- a black hole into which investors will pour billions of dollars with no chance of ever seeing a return on their investment. I expect Plug to fail, but I think its real collapse will be a few years in the making, right about when the price of oil falls precipitously.

Shares of the fuel cell company are down 72% since that call. Of course, as Rich expected, the stock's major drops came when oil prices started to fall off the cliff. 

The bearish takeaway?
Don't believe the hype. Alternative energy plays like hydrogen fuel cells may sound exciting, but without solid evidence of long-term economic viability, it would be tough to classify them as prudent investments. Like Buffett once said, "Obviously, many companies in high-tech businesses or embryonic industries will grow much faster than will The Inevitables. But we would rather be certain of a good result than hopeful of a great one."

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!