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 top ratings of four or five stars:
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Company
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Yesterday's Gain
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China Precision Steel (Nasdaq: CPSL )
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16.00%
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Helix Energy Solutions (NYSE: HLX )
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9.02%
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Melco Crown Entertainment
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8.90%
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Terra Nitrogen
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5.39%
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Cisco Systems (Nasdaq: CSCO )
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3.65%
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There's a reason I selected those notable gainers, as opposed to other winners making noise on Monday, like low-rated Research In Motion (Nasdaq: RIMM ) . 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, 97% of the 687 members who've rated China Precision Steel have a bullish opinion of the stock. Just last week, one of those Fools, Subida, explained why the stock seemed like a super-solid selection:
Debt/Equity well below 1. An outstanding growth story; note that only one analyst covers this bad boy, and he undershot the company by, well, 500% last quarter. Positive and increasing sales growth figures. It's clarity that's holding this puppy down, but as the quarters roll on, and the cash rolls in, the potential for multi-baggin' will show itself.
Following yesterday's impressive 16% pop, Subida is off to a strong start with that outperform pick.
The bullish lesson?
Learn to combine the best of both small-cap and global investing strategies. By buying into proven small-caps domiciled in attractive foreign markets, you earn the double benefit of owning a business that has plenty of room to rocket, while getting paid in non-U.S.-denominated cash flows. As long as you're cognizant of price, international small caps offer a great way to play both offense and defense.
And now for the losers ...
Of course, winning isn't everything in the stock market.
Here are five of Monday's biggest decliners with one- or two-star ratings:
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Company
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Yesterday's Loss
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Westwood One (Nasdaq: WWON )
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23.71%
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AMR
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4.79%
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Coldwater Creek
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4.56%
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Home Inns & Hotels Management
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4.49%
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UAL (Nasdaq: UAUA )
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3.91%
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While yesterday's drop in highly rated solar stocks Yingli Energy (NYSE: YGE ) and ReneSola may have caught our community off guard, low-ranked stocks are fully expected to fall hard.
Did CAPS call the fall?
Last Friday, for instance, Garyestein broadcasted some rather bearish stats about Westwood One:
This company has a -526% ROE ttm, a -86% profit margin, net income available to common of -386.8 mil, 4.57 mil of cash and current liabilities of 69,544,000, -24 mil operating cash flow ... [Price-to-Book] 8.42, shorts went from 2.7k in Jan to 8.25k in Feb. No single new Personality/Show is gonna dig them out of this hole anytime soon.
After yesterday's nasty 23%-plus plunge, Garyestein is also off to a great start with that bearish call.
The bearish takeaway?
Don't be swayed by Wall Street's short-termism. As long as a company's fundamentals continue to frighten you, it's best to stick to your long-term thesis and not become too affected by daily swings of sentiment. As the legendary Benjamin Graham famously said, "In the short run, the market is a voting machine, but in the long run, it is a weighing machine."
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!
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