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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Marvel Entertainment (NYSE: MVL )
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25.15%
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Mahindra Satyam (NYSE: SAY )
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21.53%
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E*TRADE (Nasdaq: ETFC )
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7.32%
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DreamWorks Animation
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6.53%
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BJ Services
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4.08%
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There's a reason I selected those notable gainers, as opposed to other winners making noise on Monday, like one-star stock Hemispherx Biopharma: Stocks go up all the time, but unless you were able to predict the pop, what does it matter?
Our community of more than 140,000 CAPS Fools considers its "high-star" stocks the most likely to outperform the market.
Written in the (five) stars?
For example, 95% of the 3,943 members who've rated longtime Motley Fool Stock Advisor selection Marvel have a bullish opinion of the stock. In late May, one of those Fools, wolfhounds, made a particularly uncanny call on the superhero specialist
What does [Marvel] have that Disney (NYSE: DIS ) and other studios don't? A cash generating monster in licensing. Their movies can be moderately successful and management will find more deals to ever increase the licensing of those incredibly popular characters.
Of course, shares of Marvel surged by more than 25% yesterday after Disney said it would indeed buy the company for $4 billion in cash and stock.
The bullish lesson?
Always think like a business owner. All sorts of noise can depress a stock's price in the short term, but the true investor is able to focus on the factors that really count over time. By buying into well-positioned, capital-light cash cows at reasonable prices, you give yourself plenty of "upside" opportunities -- like being bought out by one of the big boys -- to earn an outsized return.
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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AIG (NYSE: AIG )
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9.76%
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PMI
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6.18%
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DryShips
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4.58%
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Citigroup (NYSE: C )
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4.40%
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Las Vegas Sands
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3.13%
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While yesterday's plunge in five-star stock Baker Hughes (NYSE: BHI ) may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.
Did CAPS call the fall?
Just two days ago, for instance, CAPS member markodegr8 voiced skepticism over AIG's surging stock price: "This recent incredible rally has been sparked by seemingly nothing. I am very skeptical that this stock will continue increasing, and once people realize wait the recession isn't over yet, this stock will come crashing down again."
In line with that warning, shares of the embattled insurer sank yesterday after a weekend report by The Wall Street Journal made a case that the stock remains significantly overpriced.
The bearish takeaway?
Never confuse an improving price for improving prospects. As long as a company's financial situation continues to deteriorate, short-term, speculation-driven run-ups can last for only so long. As Warren Buffett reminds us, "For some reason, people take their cues from price action rather than from values. ... The dumbest reason in the world to buy a stock is because it's going up."
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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