Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight a few of Monday'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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The9 Limited
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5.19%
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Take-Two Interactive (Nasdaq: TTWO )
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3.19%
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Frontier Communications
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2.86%
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SiRF Technology
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2.04%
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Duke Energy (NYSE: DUK )
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1.67%
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There's a reason why I selected those notable gainers, as opposed to other winners making noise on Monday, like one-star stock SunOpta. Stocks go up all the time, but unless you were able to predict the pop, what does it matter?
Our community of more than 135,000 CAPS Fools considers its "high-star" stocks the most likely to outperform the market.
Written in the (five) stars?
For example, 92.3% of the 1,006 members who've rated Take-Two have a bullish opinion of the stock. Three months ago, one of those Fools, papawilk, explained why the video game publisher was worth playing for the long haul:
They have negligible debt. Financially strong. ... Advertising is hitting its stride in the gaming world and is better than anyone at reaching their demographic. Bioshock was game of the year and Bioshock 2 should rake in the cash. The [Grand Theft Auto] series is a juggernaut and will not be ending for quite some time.
Take-Two is up an impressive 50% since that call.
The bullish lesson?
The simplest reasons to buy a stock are often all you need to make money. As CAPS' papawilk understands, when a company owns such wildly popular brands as Take-Two does and stands on firm financial footing, it's really not necessary to overthink the investment. Like Peter Lynch once wrote, "Never invest in any idea you cannot illustrate with a crayon."
And now for the losers ...
Of course, winning isn't everything in the stock market.
Here are five of Monday'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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Fortress Investment Group (NYSE: FIG )
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18.56%
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Hartford Financial
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11.09%
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DryShips (Nasdaq: DRYS )
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10.66%
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Las Vegas Sands (NYSE: LVS )
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9.95%
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MGM Mirage (NYSE: MGM )
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9.89%
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While yesterday's drop in highly rated Freeport-McMoRan Copper & Gold (NYSE: FCX ) 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 rickdoom tried to penetrate Fortress Investment's recent price run: "[Fortress'] share price has been driven up artificially high largely due to 'pie in the sky' TALF money speculation in conjunction with massive amounts of pumping by the media. Likely to give back most of its gains as the euphoria dies off."
After yesterday's plunge, shares of the investment manager are lagging the market by over 15 percentage points since that call.
The bearish takeaway?
Never confuse a rebounding price for improving fundamentals. As long as a company's fundamental picture continues to deteriorate, short-term, speculative 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.
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