Wednesday's Hottest Stocks

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:

There's a reason I selected those notable gainers, as opposed to other winners making noise on Wednesday, like low-rated automakers Ford and Toyota (NYSE: TM). Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 150,000 CAPS Fools considers its high-star stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 98% of the 481 All-Star members who've rated Joy Global have a bullish opinion of the stock. Last spring, one of those top Fools, bradford86, helped spread Joy throughout our community:

Joy Global, as the company has shown strength even in a very tough economy, a relatively small amount of long-term debt, and eventually commodity prices will begin to rebound, which should be a great boon for miners like Joy. They are doing the right things to make it through this rough patch and even after the appreciation today, Joy Global is still an appealing long term value.

Shares of the mining equipment maker are up more than 93% since that call. In fact, yesterday's pop came after the company's quarterly profit fell 11% and still managed to top expectations.

The bullish lesson?
Never become anchored to a stock's previous price levels. Regardless of past gains, a stock can always go higher if the story remains sound, the fundamentals keep improving, and the valuation remains cheap relative to its future growth potential. As CAPS' bradford86 understands, ignoring a stock simply because it's rising in price is one of the easiest ways to miss out on the next round of multibagger returns."

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:  

While yesterday's plunge in highly rated Ctrip.com may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Last summer, for instance, hyllandresearch warned Fools about banking on Synovus:

They were very optimistic during the most recent conference call ... predicting a return to profitability by the first quarter of 2010. I don't see that happening as long as [commercial real estate] does stop deteriorating very soon. … They think it won't follow the same path as residential real estate, I disagree.

Not surprisingly, shares of the regional bank are trailing the market by 38 points since that call. In fact, yesterday's drop came after Synovus said it is facing an informal SEC inquiry "to determine whether any person or entity has violated the federal securities laws."

The bearish takeaway?
Always identify a stock's dangers before they come back to haunt you. One of the most common mistakes we make as investors is blindly buying into management's optimism for the future, while completely ignoring the company's actual risk exposures. As Warren Buffett simply says, "Risk comes from not knowing what you're doing."

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 retire wealthy.

Log in to CAPS today and start participating. It's absolutely free -- and a lot of fun!