Monday's Biggest Stock Stars

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

Without further ado:

Company

Yesterday's Gain

U.S. Geothermal (AMEX: HTM  )

14.41%

Sutor Technology Group 

13.46%

Trico Marine Services (Nasdaq: TRMA  )

10.72%

China Fire & Security Group

10.69%

Zhongpin (Nasdaq: HOGS  )

10.22%

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

Our community of more than 105,000 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 its first year, top-rated stocks returned roughly 28%.

Written in the (five) stars?
For example, of the 115 CAPS All-Stars who've rated Trico Marine Services, just one has a bearish opinion. Driven by that top-notch support, the provider of marine support vessels has kept a perfect five-star rating for more than six months straight.

Just a few days ago, CAPS All-Star mindmuse commented on Trico's proposed buyout of a fellow subsea service company :

Down -- appropriately -- on acquisition offer for DeepOcean. Lots of risk, but I think this is a huge strategic play. Truly seizing the moment -- with shifts toward deepwater oil and shortage of support ships, they'll be in a couple of sweet spots in oil services.

As if to echo that bullish sentiment, shares of Trico Marine surged yesterday, after an analyst suggested that the DeepOcean deal would fuel significant growth for the company, and probably boost its stock over the next year.

The bullish lesson?
Always do the due dilly on proposed deals. Some of the better reasons for a merger include gained economies of scale, use of complementary resources, and, as CAPS' mindmuse pointed out, access to attractive segments. So, if you ever come across a planned acquisition that has prospects for one (or all) of the above, it might be a good idea to jump in -- especially if Wall Street hasn't realized it yet.

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

Here are Monday's biggest one-star decliners:  

Company

Yesterday's Loss

Beazer Homes (NYSE: BZH  )

11.14%

UAL (Nasdaq: UAUA  )

10.07%

IDT

8.08%

Pure Cycle

7.58%

Jazz Pharmaceuticals

7.54%

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

Did CAPS call the fall?
Less than two weeks ago, for instance, CAPS All-Star icanpickm pieced together these bearish bits on Beazer Homes:

First, why haven't they produced a financial statement since July...

Secondly, these guys were still grading lots on a large subdivision last summer in the town where I live. This would not be alarming if it was not one of the top five highest foreclosure markets in the country ...

Thirdly, my company did some business with them this winter. Getting paid was worse than pulling teeth ...

Consistent with that take, shares of the embattled homebuilder plunged yesterday after posting a second-quarter loss of $230 million, as the housing market continued to deteriorate.

The bearish takeaway?
Learn to master the "Mosaic Theory" method of analysis. Mosaic Theory involves collecting bits and pieces of information about a company -- both qualitative and quantitative -- to determine if they tell a story that makes sense. As CAPS' icanpickm demonstrated perfectly, the pieces of Beazer Homes could lead to only one reasonable conclusion: heavy losses.

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, tens of thousands of investors are Foolishly sharing insightful investment tips to help, above all else, 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!

Amazon is a Stock Advisor recommendation. Ceragon Networks was chosen by Motley Fool Hidden Gems and China Fire & Security was selected in Global Gains. Try any of these newsletters free for 30 days.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool's disclosure policy is always the big winner.


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