Tuesday's Biggest Stock Stars

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

Without further ado:

There's a simple reason I selected the largest five-star gainers, as opposed to other big-name winners making noise on Tuesday, 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 110,000 CAPS Fools considers its five-star stocks the most likely to outperform the market. And so far, CAPS has indeed proved its market-beating prowess: Over its first year, top-rated stocks returned roughly 28%.

Written in the (five) stars?
For example, out of the 164 CAPS players who've rated Tengasco, just one has a bearish opinion. Fueled by that Foolish support, the Tennessee-based oil and gas company recently earned its first five-star rating.

Just last week, CAPS player ArmChairQB touched on Tengasco's top-drawer top dog:

The CEO (Jeffrey Bailey) is from HAL [Halliburton (NYSE:HAL)] and cleaned up the books in 2006. It is a value play in a strong sector. Current P/E 12.7 vs industry 20.4. P/Cash Flow 10.5 vs Industry 17.2. Debt/Equity is .13 vs. Industry .44. ... It is a fair guess that this company could run up a lot more. I have watched this company for years and just jumped in within the last 30 days. Run with the Bulls.

Tengasco is up an awesome 32% over the last week.

The bullish lesson?
Learn to follow the leaders. Senior managers are the ones you've essentially hired to run your business and generate an above-average return, so examining their professional histories (within the 10-K and proxy) only makes sense. As CAPS' ArmChairQB understands, investing is all about stacking the odds in your favor, and finding a truly talented jockey with a strong track record is one of the best ways to do that.

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

Here are Tuesday's biggest one-star decliners:  

One-star stocks inspire the least confidence from our CAPS players. So although yesterday's drop in highly rated solar stocks Suntech Power (NYSE:STP) and LDK Solar 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?
Back in January 2007, for instance, CAPS All-Star NetscribeConsGds circulated these bearish thoughts on Lee Enterprises:

[O]ver the years, newspaper advertising spending has been negatively affected by state of the overall economy, including unemployment rates, inflation, energy prices and consumer interest rates. ... [A]ccording to national Editor and Publisher data, both daily newspaper and Sunday circulation has been on a declining trend since their peak in 1985. ... A declining trend toward newspaper circulation would negatively impact the advertising revenue and therefore it is best to avoid Lee.

Not surprisingly, shares of the newspaper publisher are down 88% since that call. In fact, Lee plunged to a 27-year low yesterday after a Wall Street analyst downgraded the stock, citing the weak advertising market -- exactly as CAPS' Netscribe had warned.

The bearish takeaway?
Make sure the (business) trend is your friend. For market-beating returns, it's crucial that you position your portfolio to take advantage of massive shifts in commerce, rather than struggle against where the world is headed. In Wayne Gretzky's words, "Skate to where the puck is going, not to where it's been."

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, 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!