Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight a few of Tuesday's biggest winners among the stocks with a top rating of five stars.
Without further ado:
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Company
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Yesterday's % Gain
|
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Anadarko Petroleum (NYSE: APC )
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6.40%
|
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Quicksilver Resources (NYSE: KWK )
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5.57%
|
|
Huaneng Power International
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5.26%
|
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XTO Energy (NYSE: XTO )
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5.15%
|
|
Hercules Offshore (Nasdaq: HERO )
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3.99%
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There's a reason I selected notable five-star gainers, as opposed to other big-name winners making noise on Tuesday: Stocks go up all the time, but unless you were able to predict the pop, what does it matter?
Our community of more than 115,000 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: Since its inception in 2006, five-star stocks are beating the market by 12 points, annualized.
Written in the (five) stars?
For example, an overwhelming 98% of the 401 CAPS All-Stars who've rated Anadarko Petroleum have a bullish opinion of the stock.
In February 2007, CAPS member The42ndDude helped bring the Texas-based oil and natural-gas producer to our community's attention:
Beaten up because of big drops in oil. Out of favor because of debt due to two giant buyouts, which analysts hated because it killed dividends and cash. But once debt is paid down and cash flow picks up, the street will wake up to the best reserves/price on the market.
Shares of Anadarko have risen by an impressive 52% since that call. In fact, yesterday's surge came after the company announced a $5 billion share-repurchase program and said its production for the third quarter should be higher than expected -- consistent with The42ndDude's forecast of increasing free cash flows.
The bullish lesson?
Be greedy when others are fearful. As long as you've done your homework and are absolutely convinced of a company's long-term potential, a bit of skepticism from Mr. Market can create perfect buying opportunities. By buying into a quality company at a good price, you leave yourself plenty of "upside" that can be unlocked in several different ways -- be it through buyout, management buyback, or simply a case of the market coming back to its senses.
And now for the losers ...
Of course, winning isn't everything in the stock market.
Here are five of Tuesday's biggest one-star decliners:
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Company
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Yesterday's % Loss
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UAL (Nasdaq: UAUA )
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8.38%
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VeraSun Energy (NYSE: VSE )
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6.67%
|
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Circuit City Stores (NYSE: CC )
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6.55%
|
|
Beazer Homes
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5.75%
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Lennar
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5.15%
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One-star stocks inspire the least confidence from our CAPS members, and for pretty good reason: Since CAPS started, one-star stocks have dropped by an average of 11.4%, annualized.
Did CAPS call the fall?
Last month, for instance, CAPS member xKaptainx voiced some bearish concerns over UAL:
I don't see the high prices of oil going away ... which means the long-term profitability of this company is still crappy. Oil may drop until that first hurricane comes ashore in the US ... however when it does those oil prices will jump back up on the speculators which will drive this stock back down. Don't underestimate Mother Nature!
Consistent with xKaptainx's warnings, shares of UAL sank yesterday as Hurricane Gustav continued to threaten installations in the Gulf of Mexico and sent oil prices higher.
The bearish takeaway?
Never confuse a five-day pop for a five-year trend. As xKaptainx understands, if a company's long-term prospects remain bleak, it's only a matter of time before a given catalyst shakes investors back to reality. And as Benjamin Graham 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, 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!
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