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.

Without further ado:

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 MBIA (NYSE:MBI). 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, 98% of the 876 members who've rated Leucadia National have a bullish opinion of the stock. Two weeks ago, one of those Fools, decrooj, cited the holding company's dynamic investment duo, Ian Cumming and Joseph Steinberg, as the main reason to get in:

This company has its hands in every sector and is bound to pick up with the economy. ... They have some good natural gas plays. ... Timber company will pick up after housing bottoms. They also have wineries that will be major players in the next 1 to 2 years. ... the owners invest fearlessly, but they know what they are doing. "Buying good companies at low prices." This stock stands to grow at least 20% year over year for a good while.

Shares of Leucadia are beating the market by five points since that call.

The bullish lesson?
When times get tough, one of the best investments you can make is in the best investors. As CAPS' decrooj understands, brilliant capital allocators thrive on major downturns, so it's never a bad idea to let them do the bargain-hunting for you. Like Steinberg and Cumming themselves explain, "We tend to be buyers of assets and companies that are troubled or out of favor and as a result are selling substantially below the values which we believe are there."

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:  

While yesterday's plunge in highly rated CapitalSource (NYSE:CSE) may have caught our community off guard, one-star stocks are fully expected to fall hard.

Did CAPS call the fall?
Late last month, for instance, CAPS member outoffocus was baffled at how UAL was still flying:

I cant believe this worthless stock is still up. What is holding this stock up? Hope? I know I'm not the only investor that knows how to read a balance sheet. This company is teetering on bankruptcy. Thumbs down!

Not surprisingly, shares of the airline company are down almost 40% since that call. In fact, shares of several one-star airliners dove yesterday after an industry report showed that demand continued to wane in December -- just as outoffocus had warned.

The bearish takeaway?
Never confuse a resilient price for a resistant business. As long as a company's underlying financials continue to deteriorate, it's only a matter of time before the stock price starts to reflect it. By doing your own homework and ignoring Mr. Market's current opinion, as outoffocus demonstrates, you give yourself a better chance of coming to a more realistic view of a company's risk/reward profile.

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!