Friday's Biggest Stock Stars

• Email
• Share
• Print

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 top ratings of four or five stars.

Without further ado:

Company	Friday's % Gain
Ingersoll-Rand (NYSE: IR)	14.12%
Exelixis	13.89%
JA Solar	11.30%
Yingli Green Energy (NYSE: YGE)	11.27%
Suntech Power	8.24%

There's a reason why I selected those notable gainers as opposed to other winners making noise on Friday, like one-star airlines US Airways (NYSE: LCC) and UAL: 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, 99% of the 518 All-Star members who've rated Ingersoll-Rand have a bullish opinion of the stock. In May, one of those Fools, edwjm, explained why the industrial manufacturer looked too cheap to pass up:

It should see good growth from its strong position in the climate control industry. The recent renewed interest in infrastructure should also benefit sales. It has a strong collection of brand names. ... Many critics complain that [Ingersoll-Rand] overpaid for some of its recent acquisitions, but I believe that is already reflected in the current price.

Shares of Ingersoll-Rand are already up over 25% since that call. In fact, Friday's double-digit pop came after the company raised its sales guidance and narrowed the range of its earnings forecast for 2009 on signs that the recession is ending.

The bullish lesson?
Always be on the hunt for stocks priced for imperfection. It's virtually impossible to call "bottom" on a stock, but if you're confident that the risks are already baked into the price, there's a good chance your investment will turn out well. As legendary value investor Sir John Templeton famously said, "The time of maximum pessimism is the best time to buy."

And now for the losers ...
Of course, winning isn't everything in the stock market.

Here are five of Friday's biggest decliners with one- or two-star ratings:   

Company	Friday's % Loss
Netflix (Nasdaq: NFLX)	9.17%
Amazon.com (Nasdaq: AMZN)	7.86%
Broadcom (Nasdaq: BRCM)	6.79%
PNC Financial	4.53%
Cheesecake Factory	4.24%

While yesterday's drop in highly-rated MEMC Electronic (NYSE: WFR) may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
On Thursday, for instance, CAPS All-Star TMFBuck wrote that the Amazon bear case all boiled down to price:

Great management team and a wonderful company. Why short? This thing is really expensive and to their credit the management team recognizes it. They bought Zappos and were smart enough to use stock to do it. While tipping my hat to Bezos I'll take the downside here.

Consistent with that warning, shares of Amazon sank Friday after its second-quarter results failed to dazzle investors, despite being largely in-line with Wall Street expectations.

The bearish takeaway?
Beware of great businesses at bad prices. Valuation does matter in investing, and if you're not paying attention, even the most wonderful asset can become a liability. As Warren Buffett tells it, "Investors making purchases in an overheated [stock] need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid."

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!