Thursday's Biggest Stock Stars

Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight Thursday's biggest gainers among the stocks with a top rating of five stars. Without further ado:

Company

Yesterday's Gain

Rofin-Sinar Technologies (Nasdaq: RSTI  )

17.66%

RRSat Global Communications (Nasdaq: RRST  )

15.97%

Super Micro Computer

14.70%

Immersion (Nasdaq: IMMR  )

14.49%

TDK

13.54%

There's a simple reason why I selected the largest five-star gainers, as opposed to other big-name winners making noise on Thursday, like one-star homebuilders Standard Pacific and Pulte Homes (NYSE: PHM  ) . Stocks go up all the time, but unless you were able to predict the pop, what does it matter.   

Our community of more than 83,000 CAPS Fools considers its five-star stocks the most likely to outperform the market. And so far, CAPS has indeed proven its market-beating prowess: Over the last year, top-rated stocks have returned roughly 28%.

Written in the (five) stars?
For example, of the 333 CAPS All-Stars who've rated Motley Fool Hidden Gems selection Rofin-Sinar Technologies, only one is bearish. Of course, the laser maker's 200% return since it was picked by our team in the fall of 2004 doesn't exactly leave much to grimace about.          

This outperform pitch by CAPS All-Star TMFMattyA last March touched on Rofin's "worldly" appeal:  

This is a proven leader in industrial laser and component manufacturing. The diversified nature of the company's customer base promises correlation with the growth in the global economy. The company generates gobs of cash and has virtually zero debt on its balance sheet. At current prices, the company's stock is certain to outperform over the long-term.

Rofin-Sinar is up an impressive 43% since that call. In fact, yesterday's pop came after the company posted first-quarter profit growth of 47%. Strength in the European and Asian markets more than made up for sagging sales in North America -- consistent with TMFMattyA's outperform case.

The bullish takeaway? Globetrotting is easier than you think. If you're apprehensive about the risks of foreign investing, buying into well-run, cash-generating U.S. multinationals can be a nice way to gain international exposure. As Rofin-Sinar's own portfolio shows, a little global diversification can go a long way toward offsetting any slump here at home.

And now for the losers ...
Of course, winning isn't everything in the stock market. Here are Thursday's biggest one-star decliners:   

Company

Yesterday's Loss

AmericanWest Bancorporation

12.56%

TurboChef Technologies (Nasdaq: OVEN  )

12.47%

Star Scientific

12.28%

Ultratech

10.46%

Mentor Graphics

10.23%

One-star stocks inspire the least confidence from our CAPS players. So while yesterday's drop in five-star stock PeopleSupport (Nasdaq: PSPT  ) may have caught our community off guard, one-star stocks are fully expected to fall hard. Over the last year, CAPS' lowest-rated stocks dropped an average of 16.6%.

Did CAPS call the fall?
For instance, this TurboChef Technologies bear call by CAPS All-Star NetscribeConsGds highlighted the high-speed-oven maker's competitive disadvantages to another Foolish favorite:

Revenue contribution from Subway restaurant, TurboChef's biggest client, has been declining for some time ... Starbucks (Nasdaq: SBUX  ) has planned to install 1200 TurboChef commercial ovens could drive revenues ... [The] company's biggest competitor Middleby has recently acquired 'Jade', which means no free lunch for TurboChef. Acquisition will not only increase Middleby's foothold in the commercial oven market but also mark its entry in the residential ovens.

Shares of TurboChef are down 25% since that pitch last April. In fact, yesterday's drop came after major customer Starbucks announced that it would no longer sell warm breakfast sandwiches in North America.

The bearish lesson? Buy the best puppies. In the long run, having a dominant edge in the marketplace drives superior returns on capital, and ultimately, market-beating returns for shareholders. Judging from the numbers, it's pretty clear why the two oven stocks have gone in vastly different directions over the last decade.

The final Foolish move
Investors often focus strictly on stock price movements (or the results), 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! 


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