Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight a few of Wednesday's biggest winners among the stocks with top ratings of four or five stars.
Without further ado:
|
Company
|
Yesterday's % Gain
|
|
WellCare Health Plans (NYSE: WCG )
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14.17%
|
|
ViroPharma
|
13.33%
|
|
McKesson
|
8.93%
|
|
DreamWorks Animation
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8.54%
|
|
Honda Motor
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6.93%
|
There's a reason why I selected those notable gainers as opposed to other winners making noise on Wednesday, like low-rated Citigroup (NYSE: C ) . 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 164 All-Star members who've rated WellCare have a bullish opinion of the stock. In April, one of those top Fools, ACMIP, explained why the scandal-ridden insurer still looked healthy enough to play:
WellCare's ability to generate cash over the next few years and beyond is being obscured by a number of temporary issues/concerns (both company and industry specific), none of which permanently impair their franchise. The bottom line is that this company is just way too cheap relative to its long term earnings power. Outperform.
Shares of WellCare are already up over 80% since that call. In fact, yesterday's pop came after the company posted a quarterly profit that easily topped Wall Street estimates and issued full-year guidance that was also better than expected.
The bullish lesson?
Not all scandals are created equal. By figuring out which stories Mr. Market has possibly overreacted to, you'll be one step closer to bagging a legitimate bargain. As Warren Buffett said, "Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised."
And now for the losers ...
Of course, winning isn't everything in the stock market.
Here are five of Wednesday's biggest decliners with one- or two-star ratings:
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Company
|
Yesterday's % Loss
|
|
Yahoo! (Nasdaq: YHOO )
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12.08%
|
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Sprint Nextel
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11.76%
|
|
MGM Mirage (NYSE: MGM )
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7.75%
|
|
Moody's
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7.60%
|
|
Las Vegas Sands
|
7.02%
|
While yesterday's drop in five-star stock ConocoPhillips (NYSE: COP ) 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 greenwave3 joined Fools in booing Yahoo!:
The new CEO is arrogant[.] I don't think the company is going to do well from here forward. The gap between [Google (Nasdaq: GOOG ) ] and Yahoo in the paid search business is large. … All that content and Yahoo still can't figure out how to make a buck.
Consistent with that call, shares of Yahoo! plunged yesterday as investors jeered management's decision to outsource its search platform to Microsoft (Nasdaq: MSFT ) on relatively disappointing terms.
The bearish takeaway?
Never overlook the jockey when placing your bets. Like CAPS' greenwave3 understands, the quality of a company's management can often predict how well it will perform as an investment. As value guru Bruce Berkowitz reminds us: "A bad person can cause you pain every time, no matter how good the company is. Management is important. They should have a paper trail of succeeding."
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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