Tuesday's Biggest Stock Stars

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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, here they are:

Company	Yesterday's % Gain
Carpenter Technology (NYSE: CRS)	9.23%
Arch Coal (NYSE: ACI)	8.02%
Norfolk Southern	6.66%
NVIDIA (Nasdaq: NVDA)	5.90%

There's a reason why I selected notable five-star gainers as opposed to other big-name winners making noise on Tuesday, such as 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 125,000 CAPS Fools considers its five-star stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 95% of the 123 All-Star members who've rated Carpenter Tech have a bullish opinion of the stock. In late October, one of those Fools, tenmiles, brought the specialty metal manufacturer to our community's attention:

Patient longs may want to nail Carpenter at current $16.39 level. Recently impacted by macro environment and Boeing (NYSE: BA) strike, but very solid long term, high ROE grower now trading at discount to book with ample cash cushion to ride out the near term turmoil.

Carpenter Tech is up 15% since that pitch. In fact, yesterday's pop came after the company posted a 47% drop in its quarterly profit and still came in ahead of Wall Street's expectations -- in line with tenmiles' call.

The bullish lesson
In investing, it's far better to keep your head down rather than up. As long as you make a conscious effort to limit your downside, like tenmiles demonstrated, market-trouncing returns often just take care of themselves. As value guru Mohnish Pabrai once wrote, you should always look for investments where the scenario is at least, "Heads, I win; tails, I don't lose too much."

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
Delta Air Lines (NYSE: DAL)	20.14%
General Growth Properties	17.48%
Continental Airlines	14.18%
AMR	13.31%
US Airways	12.86%

While yesterday's drop in five-star oil stock Valero Energy (NYSE: VLO) may have caught our community off-guard, one-star stocks are fully expected to fall hard.

Did CAPS call the fall?
Last month, for instance, CAPS All-Star goofyfool wrote that Delta Air Lines was all set for a nosedive: "Lower demand during recession and payments due on hedging of fuel prices will create a downward spiral."

Consistent with that call, shares of Delta plunged yesterday after the carrier reported a fourth-quarter loss of $1.4 billion on slumping demand, employee stock awards, and jet-fuel hedges -- just as goofyfool had warned.

The bearish takeaway
Always identify a stock's risk exposures before they come back to haunt you. One of the most common mistakes we can make as investors is failing to see the nasty things that lurk just around the corner. Unless you're willing to consider all of the possible ways your stock might get killed -- both in the short and the long run -- there's a good chance you'll wake up one day and get blindsided.

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!