Tuesday's Biggest Stock Stars

Yesterday's market is today's moneymaking road map.

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 top ratings of four or five stars:

There's a reason I selected those notable gainers, as opposed to other winners making noise on Tuesday, like one-star stock Palm. Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 140,000 CAPS Fools considers its high-star stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 97% of the 713 members who've rated A-Power have a bullish opinion of the stock. Just last month, one of those Fools, SeekBalance, explained why the Chinese turbine maker looked like a particularly potent power play: "Lots of new projects under construction, plus recent acquisitions, should fuel continuing high growth. Solid balance sheet, with cash at about 10x debt, and a forward P/E under 10 -- far less than what a profitable company with this growth path in the world's fastest growing economy should be selling for."

Consistent with that call, shares of A-Power surged yesterday after announcing plans to build a plant in the U.S. to capture market share in North and South America.

The bullish lesson?
Learn to combine the best of both value and growth investing worlds. By seeking rapidly growing companies at cheap prices, you not only buy into a stock trading below its fair value today, but you also own a business that can increase that value tomorrow. As Warren Buffett reminds us, "Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily understandable business whose earnings are virtually certain to be materially higher five, 10, and 20 years from now."

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

Here are five of Tuesday's biggest decliners with one- or two-star ratings:  

While yesterday's drop in five-star Jacobs Engineering (NYSE:JEC) and may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Last year, for instance, CAPS member turbulenceglider forecast dark skies ahead for PacSun: "Their finances don't look good. They are in the red, not producing earnings for their shareholders, and if the economy is slowing, most consumer discretionary sectors will probably suffer even more."

Not surprisingly, shares of the surf- and skate-wear specialist have fallen by 68% since that warning. In fact, yesterday's nasty plunge came after a gloomy holiday season outlook overshadowed an analyst-topping third quarter.

The bearish takeaway?
Always take extra caution with tricky turnaround stocks. Attempting to catch a falling knife can certainly be profitable, but as CAPS' turbulenceglider understands, you always run the risk of grabbing it at the sharpest place. As Peter Lynch advises, it's better to "wait until the knife hits the ground and sticks, then vibrates for a while and settles down before you try to grab it."

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 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!