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 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 low-rated MGM Mirage. Stocks go up all the time, but unless you were able to predict the pop, what does it matter?

Our community of more than 145,000 CAPS Fools considers its high-star stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 98% of the 543 members who've rated SORL have a bullish opinion of the stock. Less than three months ago, one of those Fools, Aceuphisleev, explained why the Chinese auto parts maker was still worth riding:

I wish I could have rated this stock back in March, but it still looks poised to outperform from this point on. As China continues to develop its interior, the need for commercial vehicles will be huge. SORL appears to have carved out a nice niche in the auto parts industry by focusing on this segment.

Including yesterday's market-bucking pop, shares of SORL have gone on to soar another 85% since that call.

The bullish lesson?
Never become anchored to a stock's previous price levels. Regardless of past gains, a stock can always go higher if the story remains sound, the fundamentals keep improving, and the valuation remains cheap relative to its future growth potential. As CAPS' Aceuphissleev understands, ignoring a stock simply because it's rising in price is one of the easiest ways to miss out on the next round of multibagger returns.

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 plunge in highly rated Alcoa (NYSE:AA) may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
CAPS member uclayoda87, for instance, was completely unconvinced of Zale's price surge this past Monday: "A big percentage rise in the stock price, but it is likely to have another big fall if the employment picture does not improve dramatically. Since I think this is unlikely to happen, I'm betting that the stock is will fall again."

Following yesterday's double-digit fall, uclayoda87 is off to a strong start with that underperform call.

The bearish takeaway?
Never confuse a one-day pop with a multiyear trend. If a company's underlying fundamentals continue to deteriorate, short-term bouts of exuberance can last for only so long. As Warren Buffett observes, "For some reason, people take their cues from price action rather than from values. ... The dumbest reason in the world to buy a stock is because it's going up."

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 retire wealthy.

Log in to CAPS today and start participating. It's absolutely free -- and a lot of fun!