Wednesday's Biggest Stock Stars

Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight Wednesday's biggest gainers among the stocks with a top rating of five stars.

Without further ado:

There's a simple reason why I selected the largest five-star gainers, as opposed to other big-name winners making noise on Wednesday, like the low-rated Baidu.com (NASDAQ:BIDU). Stocks go up all the time, but unless you were able to predict the pop, what does it matter?

Our community of more than 84,000 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, out of 214 CAPS players who've rated Central European Distribution (CEDC), a whopping 98% are bullish. On the back of that strong Foolish support, the Polish wine-and-spirits distributor has maintained a perfect five-star rating for more than five months straight.

Back in 2006, CAPS player soggytennisballs was even kind enough to share these firsthand experiences with our community:

After my [trip] in Central & Eastern Europe, I know they can DRINK! The area has some of the highest alcohol consumption rates in the world. CEDC is the main alcoholic distributor in the region. Also, provides exposure to an industry that is independent from the global business cycle.

CEDC is up an amazing 179% since that call. In fact, yesterday's gain came after the company agreed to buy 49.9% of yet another alcoholic distributor, the Whitehall Group, in order to further its expansion into Russia.

The bullish takeaway?
Learn to profit from your experiences. After all, there's no better way to gain an edge on Wall Street than to pay attention to the multibaggers lurking in our own everyday lives. As Peter Lynch once wrote, "So often we struggle to pick a winning stock, when all the while a winning stock has been struggling to pick us."

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

Here are Wednesday's biggest one-star decliners:   

One-star stocks inspire the least confidence from our CAPS players. So although yesterday's drop in highly-rated Autodesk (NASDAQ:ADSK) 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?
Late last March, for instance, CAPS All-Star gdude501 offered these bearish thoughts on Nortel Networks:  

"Sector remains oversold and while it should eventually rebound, there is stiff competition from more nimble companies. Nortel has a track record of poor performance and sluggish response."

Shares of the telecom equipment maker have plunged a gut-wrenching 59% since that call. Of course, a big chunk of that decline came yesterday, after the company posted a staggering fourth-quarter loss of $844 million on weak carrier demand and restructuring charges. Management's turnaround plan is taking much longer than expected -- just as gdude501 had warned.

The bearish lesson?
If you're optimistic about a slumping sector, only count on the fittest to survive. If and when industry demand does pick up, the weaker players will likely remain shaken, while the best of breed should come out stronger than before. Turnarounds are tricky enough as it is, so don’t make things even more difficult by betting on deficient companies with a long history of value destruction.

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!