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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Navios Maritime (NYSE: NM )
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13.46%
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Mechel OAO (NYSE: MTL )
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10.81%
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Joy Global
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6.83%
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PotashCorp (NYSE: POT )
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5.51%
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Yamana Gold (NYSE: AUY )
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4.03%
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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 Morgan Stanley (NYSE: MS ) . 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, 97% of the 429 All-Star members who've rated Navios have a bullish opinion of the stock. Last month, one of those Fools, TSIF, explained why the dry bulk shipper looked too good to pass up:
Navios Maritime continues to perform reasonably well against other dry bulk shippers. The market is starting to differentiate between shippers with a good mix of forward contracts, reasonable debt, a balanced dividend ... and cost containment. ... The 0.06 per quarter dividend continues to be a nice plus while waiting for the shipping industry to recover.
Consistent with that call, shares of Navios surged yesterday after it announced plans to expand its fleet with four new Capesize vessels at a combined cost of $324.5 million.
The bullish lesson?
Take advantage when Mr. Market throws an attractive baby out with the bathwater. When things get shaky, investors tend to sell stocks haphazardly, based simply on the sector they belong to, rather than taking things on a case-by-case basis. But as Warren Buffett says, "We want to do business in such an environment, not because we like pessimism but because we like the prices it produces."
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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Hemispherx Biopharma (NYSE: HEB )
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13.39%
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US Airways (NYSE: LCC )
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12.15%
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UAL
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10.36%
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Cheesecake Factory
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4.85%
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New York Times
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4.53%
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While yesterday's drop in highly rated Actuant may have caught our community off guard, low-ranked stocks are fully expected to fall hard.
Did CAPS call the fall?
Two weeks ago, for instance, CAPS member kropopkin brought Hemispherx's swine-flu-fueled price run to our community's attention:
There is so much pumping on little hard evidence, and a lot of smoke and mirrors being used here. Also, a large boost to the price based on the swine flu adjuvant aspect, where as it seems lost on the masses that possible FDA approval is for [chronic fatigue syndrome] and not a vaccination adjuvant.
After yesterday's double-digit drop, shares of the development-stage biotech are already down more than 20% since that call.
The bearish takeaway?
Always invest with a healthy dose of skepticism. There are certainly companies that have the "next big thing" in their pipeline, but unless you have exceptional insight in identifying them, there's really no need to take such long-shot bets. As CAPS' kropopkin understands, any one- (or two-) trick pony can be bid up on enthusiasm, but if the expectations aren't rooted in reality, it's just a matter of time before your rocket stock "turns torpedo."
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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