Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight a few of Tuesday's biggest winners among the stocks with a top rating of four or five stars.
Without further ado:
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Company
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Yesterday's % Gain
|
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Eagle Bulk Shipping (Nasdaq: EGLE )
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19.34%
|
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Navios Maritime
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12.36%
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E*Trade Financial
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7.47%
|
|
Suntech Power (NYSE: STP )
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4.14%
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Halliburton (NYSE: HAL )
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4.01%
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There's a reason why I selected those notable gainers, as opposed to other winners making noise on Tuesday, like low-rated Dendreon (Nasdaq: DNDN ) . Stocks go up all the time, but unless you were able to predict the pop, what does it matter?
Our community of more than 130,000 CAPS Fools considers its highest-rated stocks the most likely to outperform the market.
Written in the (five) stars?
For example, 93% of the 191 All-Star members who've rated Eagle Bulk have a bullish opinion of the stock. Last week, one of those Fools, JSykora, explained why the dry bulk shipper looked too cheap to pass up:
I think that once this recession has subsided, and people start to manufacture again, shippers are going to be very important. ... I made a similar play on [Navios Maritime] and am going to do so with [DryShips], despite the going concern warning. I just feel that prices are too depressed for these guys ...
Eagle Bulk is up a sweet 38% over the last week alone. In fact, shares of several shippers surged yesterday on fresh dealmaking news from DryShips and Diana Shipping -- consistent with JSykora's sector call.
The bullish lesson?
Learn to pounce on Mr. Market's shortsightedness. Beaten-down stocks aren't always easy on the stomach, but if you truly believe in a company's (or sector's) long-term tailwinds, significant slowdowns are the very best time to buy. As Warren Buffett once remarked, "Only for short-term investors and market timers is a correction not an opportunity."
And now for the losers ...
Of course, winning isn't everything in the stock market. Here are five of Tuesday's biggest decliners with a one- or two-star rating:
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Company
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Yesterday's % Loss
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Gannett (NYSE: GCI )
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19.46%
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Hartford Financial (NYSE: HIG )
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12.80%
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Morgan Stanley (NYSE: MS )
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11.97%
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Radian Group
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11.74%
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Capital One Financial
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11.14%
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While yesterday's drop in five-star stock VimpelCom may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.
Did CAPS call the fall?
Last week, for instance, CAPS All-Star Jeffro818 showed skepticism over Gannett's 39% price jump on Thursday (which came after fund manager Ariel Investments said it boosted its stake in the company):
In the long run they will lose out to the other multiple forms of media/advertising/news/information sources. Newspapers are an outdated source of info. How many people here have a newspaper subscription? Not to many I bet.
Consistent with that call, shares of Gannett plunged yesterday, as the market finally realized that the company's first-quarter earnings announcement this Thursday would be extremely difficult.
The bearish takeaway?
Never confuse a one-day pop for a multiyear trend. As long as a company's underlying economics continue to deteriorate, "non-fundamental" run-ups can only be sustained for so long. By doing your own homework and ignoring Mr. Market's mood swings, as Jeffro818 shows, you give yourself a better chance of coming to a 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!
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