Tuesday's Biggest Stock Stars

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 top ratings of four or five stars:

There's a reason I selected those notable gainers, as opposed to other winners making noise on Tuesday, like one-star stock AIG (NYSE:AIG): 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, 97.3% of the 2,228 members who've rated Burlington Northern have a bullish opinion of the stock. In late January, one of those Fools, addedupon, brought some rather interesting Oracle activity to our community's attention:

[H]igh energy prices will return, increased [regulations], all contribute to the resurrection of the rails. In addition, something unusual is happening with Warren Buffett and [Burlington Northern]. He now owns well over 20% of [Burlington Northern] and continues buying. I know of no other stocks where Buffett owns > 20% without moving for controlling interest or an outright buyout.

Shares of the railroad giant are up 44% since that call. Of course, most of that gain came yesterday after Buffett's Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B), in what he calls an "all-in" bet on the U.S. economy, agreed to buy the company for $44 billion -- consistent with addedupon's intuition.

The bullish lesson?
Learn to follow the smart money. By closely monitoring the moves of proven money masters, you can create a powerful source of "best ideas" for your own portfolio. As long as you understand the investment case and can purchase the stock within a similar price range, riding a respected manager's coattails can be a great way to market-thumping gains.

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

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

While yesterday's drop in highly rated Allied Irish Banks may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Last year, for instance, CAPS All-Star fuzion23 kindly cautioned Fools about riding on Cedar Fair:

I love the company with the fat dividend yield. However, eventhough the yield is rising due to the stock price drop, I fear that the macro economy is really taking a toll on this theme park operator. ... If the company didn't accumulate that much debt, I would feel a lot better.

Not surprisingly, Cedar Fair is down 55% since that warning. In fact, yesterday's 26%-plus plunge came after paltry quarterly results compelled the amusement park operator to say that it expects to suspend its dividend next year and use the cash to pay down debt.

The bearish takeaway?
Learn to dodge dangerous dividends. High-yield stocks can be alluring, but if that company lacks the financial stability to sustain and possibly even grow that dividend, you won't see much of a total return on your investment. As CAPS' fuzion23 understands, a nice-looking dividend is only as attractive as the business behind it.

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 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!