Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight a few of Monday's biggest winners among the stocks with a top rating of five stars.
Without further ado:
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Company
|
Yesterday's % Gain
|
|
Mechel (NYSE: MTL )
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28.76%
|
|
Focus Media Holding (Nasdaq: FMCN )
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9.26%
|
|
Taseko Mines (AMEX: TGB )
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8.70%
|
|
Navios Maritime
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7.09%
|
|
Aluminum Corp. of China (NYSE: ACH )
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5.62%
|
There's a reason why I selected notable five-star gainers, as opposed to other big-name winners making noise on Monday, like low-rated Hartford Financial (NYSE: HIG ) . 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 269 All-Star members who've rated Mechel have a bullish opinion of the stock. Two weeks ago, in a response to a fellow bull, All-Star hquote explained why the stock is a steal:
Search the entire market for stocks which
a. have Market Cap > 1B
b. P/E < 1
and you will find the only one! This is [Mechel]! This stock was severely oversold due to concerns about company ability to pay near term debt - this issue was overblown as Russian govt backs [Mechel] and other big cos.
Consistent with that call, shares of Mechel rose nearly 30% yesterday after the company received a $1 billion credit line from Gazprombank to help repay its short-term debt.
The bullish lesson?
When the shares of a company you like take a beating, always try to figure out why. If Mr. Market, in your opinion, is being too harsh with his punishment, it might be a perfect time to buy quality on the cheap. As Warren Buffett once said, "Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised."
And now for the losers ...
Of course, winning isn't everything in the stock market.
Here are five of Monday's biggest one-star decliners:
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Company
|
Yesterday's % Loss
|
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Landry's Restaurants (NYSE: LNY )
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10.78%
|
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Credit Suisse
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8.49%
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Pulte Homes
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7.94%
|
|
Warner Music Group
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7.69%
|
|
Lennar
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6.34%
|
While yesterday's drop in highly rated ViroPharma (Nasdaq: VPHM ) 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 member ayerskw served up this bearish dish on Landry's Restaurants:
While Landry's food is reasonably good, my personal experience has been that the total dining experience (quality of store offerings and the execution of operations) has been deteriorating in recent years. Accordingly, in my opinion, Landry's does not overall represent the best dining value for the consumer. Couple the aforementioned operating environment with a business that has a negative cash flow to sales; and a high debt load and it will result Landry's being an extremely poor investment.
Shares of the company are down 46% since that call.
The bearish takeaway?
Trust your own eyes above all else. Just as it might pay to "buy what you know" (and enjoy), it's probably a good idea to stay away from stocks whose services are increasingly disappointing you. Due diligence is always required, but as CAPS' ayerskw understands, if you're not a satisfied customer, it might be a stretch to think you'll be a satisfied investor.
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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