Monday's Biggest Stock Stars

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 top ratings of four or five stars.

Without further ado:

There's a reason why I selected those notable gainers as opposed to other winners making noise on Monday, like low-rated Dell (NASDAQ:DELL). Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 135,000 CAPS Fools considers its high-star stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 98% of the 1,332 members who've rated Sadia have a bullish opinion of the stock. In late January, one of those Fools, rdefly, explained why the South American pork producer still looked healthy enough to devour:

[Sadia] bet against the dollar plus market panic have brought this stock to the bottom of the barrel. Great company which enjoys the first place in meat in Brazil. It also exports to other S.American countries. Business will increase after the new trade agreement with Peru, who at the moment has all the engines going economically. Needles to say, great value.

After yesterday's pop, shares of Sadia have nearly doubled since that call.

The bullish lesson?
Learn to pounce on Mr. Market's shortsightedness. As long as you've done your homework and are absolutely convinced of a company's long-term earnings power, some short-term financial distress can create a perfect buying opportunity. Like Warren Buffett says, "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 decliners with one- or two-star ratings:   

While yesterday's plunge in five-star stock Titanium Metals (NYSE:TIE) may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Late last week, for instance, CAPS All-Star kurtdabear helped our community interpret AIG's recent 1-for-20 reverse split: "AIG will exhaust both its resources and the government's patience over the course of the next couple of years. A reverse split is generally an act of desperation, and this one is no exception, though it does create a great new entry point for shorting."

After yesterday's drop, shares of the battered insurer are already down 30% since shareholders approved the reverse split.

The bearish takeaway?
Never confuse a better-looking price for a better-looking business. As long as a company's financial picture continues to deteriorate, short-term, non-fundamental price changes -- especially via reverse split -- can only last for so long. As Benjamin Graham famously said, "In the short run, the market is a voting machine, but in the long run, it is a weighing machine."

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!