Monday's Biggest Winners and Losers

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:

There's a reason I selected notable five-star gainers, as opposed to other big-name winners making noise on Monday. Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 115,000 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: Since its inception in 2006, five-star stocks are beating the market by 12 points, annualized.

Written in the (five) stars?
For example, an overwhelming 96% of the 187 CAPS All-Stars who've rated Motley Fool Hidden Gems pick Jinpan International have a bullish opinion of the stock.

Last month, CAPS member Wayfarer2003 helped describe the opportunity to our community:

This small Chinese electrical transformer producer has strong inside ownership (more than 20%), grew revenues more than 40% last year while returning more than 20% return on equity. Certainly power distribution is increasingly important to a growing China. ... The recent fall in stock price makes it especially attractive now.

Shares of Jinpan are up 21% since that call. In fact, yesterday's surge came after the company posted second-quarter earnings growth of 47.4% on "strong demand for the Company's cast resin transformers, both in China and internationally" -- consistent with Wayfarer2003's pitch.

The bullish lesson?
Don't be afraid to fly under the radar. As CAPS' Wayfarer2003 and our team at Hidden Gems understands, screening for underfollowed, rapidly growing small caps with high levels of insider ownership often leads to market-crushing opportunities. If it's multibagger returns you're craving, you almost have to look where Wall Street's wise men and women aren't.

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:  

One-star stocks inspire the least confidence from our CAPS members, and for pretty good reason. Since CAPS started, one-star stocks have dropped an average of 11.4%, annualized.

Did CAPS call the fall?
In February, for instance, CAPS member marcd77 shared a few bearish concerns about SunTrust Banks: "SunTrust has significant exposure to real estate within Florida and I feel this will continue to pressure the stock price as housing fails to find a bottom as the credit issues continue to surface."

Not surprisingly, shares of the regional bank are down 37% since that call. In fact, yesterday's drop came on fresh worries over financial stocks and an analyst downgrade that cited SunTrust's exposure to the troubled Southeast -- just as CAPS' marcd77 had warned.

The bearish takeaway?
Get out of dangerous areas while you can! Just as companies without an ounce of product diversification should give Fools pause, those that are overly exposed to just a few geographic regions should cause some concern. When things are booming, geographic risk might seem trivial, but as SunTrust demonstrates, any material problems in those areas could spell trouble for investors.

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!