Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight a few of Friday's biggest winners among the stocks with a top rating of four or five stars.
Without further ado:
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Company
|
Friday's % Gain
|
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A-Power Energy (Nasdaq: APWR )
|
7.89%
|
|
Take-Two Interactive
|
7.57%
|
|
Golden Star Resources
|
7.05%
|
|
SanDisk
|
5.86%
|
|
Alcoa
|
3.32%
|
There's a reason why I selected those notable gainers, as opposed to other winners making noise on Friday, like low-rated Ford (NYSE: F ) . 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 "high-star" stocks the most likely to outperform the market.
Written in the (five) stars?
For example, 96.2% of the 526 members who've rated A-Power have a bullish opinion of the stock. Three months ago, one of those Fools, mikethejoker, explained why the Chinese power equipment company seemed full of attractive alternatives:
[A-Power's] wind energy play is just icing on the cake if they can make it work. The [Fuhrlander] and [General Electric (NYSE: GE ) ] deals inspire some confidence there. But it's [A-Power's] core distributed power generation systems business that should drive attractive rates in the coming years, even if the wind play doesn't pan out or takes longer than expected to develop.
After Friday's pop, shares of A-Power have more than doubled since that call.
The bullish lesson?
Know when to break the rules. Hypergrowth companies in emerging markets are notoriously fraught with risk, but by seeking those with a strong competitive advantage, solid balance sheet, and a stable of blue-chip partners, you can reduce your downside substantially. As CAPS' mikethejoker demonstrates, identifying sound small-caps levered to world-changing breakthroughs can actually be a reliable way to outsized gains.
And now for the losers ...
Of course, winning isn't everything in the stock market.
Here are five of Friday's biggest decliners with a one- or two-star rating:
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Company
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Friday's % Loss
|
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Sealy (NYSE: ZZ )
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17.20%
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Qwest Communications
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7.05%
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AIG (NYSE: AIG )
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6.52%
|
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Bank of America (NYSE: BAC )
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5.66%
|
|
AMD (NYSE: AMD )
|
5.42%
|
While Friday's plunge in five-star stock Gushan Environmental may have caught our community off guard, low-ranked stocks are fully expected to fall hard.
Did CAPS call the fall?
Last month, for instance, CAPS All-Star TSIF seemed restless over Sealy's recent price run:
I expect it to come back down slowly as most unsubstantiated POPS do after the volume dries up and investors feel they have gotten the maximum buck ... Sealy may be able to cut costs and keep sales up, but with a negative $1.80 BOOK value per share, it will be a long time turning things around. ... when you're hungry, can't pay your mortgage, ... etc, a lumpy mattress is the least of your worries.
Consistent with that call, shares of the mattress maker plunged over 15% Friday after a Wall Street analyst downgraded the stock, citing its planned recapitalization which will be dilutive for common shareholders.
The bearish takeaway?
Never confuse an improving stock price for improving fundamentals. As long as a company's fundamental picture continues to deteriorate, short-term, momentum-driven run-ups can only be sustained for so long. As Benjamin Graham famously said, "In the short run, the market is a voting machine, but in the long run it is a weighing machine."
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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