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:
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Company
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Yesterday's % Gain
|
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Akamai Technologies (Nasdaq: AKAM )
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18.07%
|
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Dolby Laboratories (NYSE: DLB )
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16.66%
|
|
Navios Maritime
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10.42%
|
|
Terex (NYSE: TEX )
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6.99%
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Teck Cominco (NYSE: TCK )
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6.84%
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There's a reason why I selected notable five-star gainers, as opposed to other big-name winners making noise on Thursday, like low-rated Sirius XM Radio (Nasdaq: SIRI ) . Stocks go up all the time, but unless you were able to predict the pop, what does it matter?
Our community of more than 125,000 CAPS Fools considers its five-star stocks the most likely to outperform the market.
Written in the (five) stars?
For example, 96% of the 2,446 members who've rated Motley Fool Rule Breakers pick Akamai Technologies have a bullish opinion of the stock. In late December, one of those Fools, boxxer55, explained why the Web content delivery company looked cheap enough to bet on:
Cash and short term investments exceed total liabilities-no risk of failure here. Earnings have been steady even in this horrible economic environment. Market cap to tangible book is 2.5 which isn't screaming bargain but at about 8x forecast earnings with great growth prospects this one is nigh impossible to pass up.
Consistent with that call, shares of Akamai surged yesterday after the company posted fourth-quarter revenue and earnings-per-share growth of 16% and 22%, respectively.
The bullish lesson?
Always try to combine the best of both value and growth investing strategies. By seeking rapidly growing companies at cheap prices, you not only buy into a stock trading below its fair value today, but also own a business that can increase that value tomorrow. As Warren Buffett once said, "Growth and value investing are joined at the hip".
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:
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Company
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Yesterday's % Loss
|
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M/I Homes (NYSE: MHO )
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26.15%
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Life Time Fitness
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20.28%
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Apartment Investment & Management
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10.74%
|
|
Developers Diversified Realty
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10.45%
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Kimco Realty
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10.04%
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While yesterday's plunge in highly rated BPZ Resources (AMEX: BPZ ) may have caught our community off-guard, one-star stocks are fully expected to fall hard.
Did CAPS call the fall?
In December, for instance, CAPS All-Star OtherOracleOfOMA built this bearish case against M/I Homes:
Lots of debt, and most of [M/I Homes'] assets are comprised of illiquid, overvalued inventories; thus, in real terms, they probably have negative equity. Oh yeah, and they only have $4 million in cash on hand-less than 1/10th of A/Pay! Can you say Chapter 11?
In line with that call, shares of M/I Homes were pummeled yesterday after the homebuilder's quarterly loss widened to $75.4 million, while Moody's placed its ratings on review for a possible downgrade.
The bearish takeaway?
Always beware of book value "value traps." M/I Homes has been selling for less than book value for quite some time, so it would've been easy to consider the stock a no-brainer bargain. Of course, as OtherOracleOfOMA correctly pointed out, overvalued assets, and deteriorating fundamentals, made the company's stated book value -- along with its share price -- pretty tough to bank 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!
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