Tuesday's Biggest Stock Stars

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:

Company	Yesterday's Gain
Euroseas (Nasdaq: ESEA  )	17.26%
NVIDIA (Nasdaq: NVDA  )	9.69%
Navios Maritime	8.70%
Cameron International (NYSE: CAM  )	8.46%
National Oilwell Varco (NYSE: NOV  )	6.21%

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

Our community of more than 120,000 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: In the first 20 months since its inception in late 2006, five-star stocks beat the market by 12 points, annualized.

Written in the (five) stars?
For example, 91% of the 113 All-Star members who've rated Euroseas have a bullish opinion of the stock. Two days ago, one of those Fools, CleverFoolNY, explained why the dry bulk shipper looks set to sail:

Management didn't indulge in buying ships when prices were at cyclical highs. They are now well-suited in terms of cash to take advantage of the temporary downturn. ... I am happy to see that management is capable of putting the long-term interests of the company over short-term satiation of its shareholders. All in all a winner: buy low, sell high.

Of course, with yesterday's surge, CleverFoolNY is off to a good start with that call.

The bullish lesson?
The quality of a company's management team can often predict how well it will perform as an investment. One of the most overlooked aspects of investing is identifying a model management team that always has the long-term interests of shareholders in mind. After all, you can have the fastest horse in the world, but if the jockey stinks, your odds of making money fall sharply.  

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:  

Company	Yesterday's Loss
SL Green Realty	20.98%
Ballard Power Systems (Nasdaq: BLDP  )	16.59%
US Airways	13.56%
Fortress Investment Group	12.37%
Palm	11.83%

While yesterday's drop in highly rated Suntech Power (NYSE: STP  ) may have caught our community off guard, one-star stocks are fully expected to fall hard: Over the 20 months since CAPS started, one-star stocks dropped an average of 11.4%, annualized.

Did CAPS call the fall?
In August, for instance, CAPS All-Star TheParadox shared these bearish thoughts on Ballard Power Systems:

[W]ith a background in engineering, i can tell you [fuel cells] are a ways away. Besides, oil is starting to calm down and i expect it may jump around a little, but its gonna come down. no commodity ever just stays sky high. And adjusted for inflation, oil has ticked down in value for several years between the 70's and now.

Not surprisingly, shares of the fuel cell company are down 63% since that call.

The bearish takeaway?
Always be on bubble watch. While stocks can blast off on investor enthusiasm and speculation in the short run, all assets tend to level off at their intrinsic values over time. You might be able to find a "greater sucker" to buy your overpriced shares once -- or maybe even twice -- but it's only a matter of time before you end up holding the bag.

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!