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:

Company

Yesterday's Gain

Brocade Communications Systems (Nasdaq: BRCD  )

18.82%

Manitowoc (NYSE: MTW  )

13.51%

VimpelCom

9.81%

Patriot Coal

8.07%

Dow Chemical

5.25%

There's a reason I selected those notable gainers, as opposed to other winners making noise on Monday, like one-star stock Capital One: 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, 98% of the 154 All-Star members who've rated Brocade have a bullish opinion of the stock. Just two weeks ago , one of those top Fools, IBSpud, made a particularly prescient call on the data storage specialist: "Brocade is clearly an outstanding company with a clear interest to its shareholders. With M&A activity picking up, I'd be surprised if someone doesn't try to acquire in the next year."

Completely consistent with that pitch, shares of Brocade surged yesterday on news that it has put itself up for sale, and that Hewlett-Packard (NYSE: HPQ  ) and Oracle (Nasdaq: ORCL  ) are seriously considering bids.

The bullish lesson?
Learn to think like a business owner, not a stock trader. All sorts of noise can swing a stock violently, but true investors can focus on the factors that really count over time. As CAPS' IBSpud demonstrates, by buying into quality companies at bargain prices, you give yourself plenty of "upside" opportunities -- including getting bought by one of the big boys -- to earn an outsized return.

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:   

Company

Yesterday's Loss

Amicus Therapeutics (Nasdaq: FOLD  )

34.59%

MBIA

6.40%

Hemispherx Biopharma

4.26%

MannKind

4.06%

Sprint Nextel (NYSE: S  )

2.56%

While yesterday's drop in highly rated Healthways may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
In February, for instance, CAPS All-Star PDTBiotech explained why Amicus would probably fold under pressure:

Yes, they're a logical choice for folding technology, but hello, there's this thing called [enzyme replacement therapy (ERT)], and a company called Genzyme (Nasdaq: GENZ  ) that's really good at it. The efficacy bar for Cerezyme, Myozyme, and Fabrazyme is very high. ... Even if they got approved, they're not going to be anywhere near good enough compared to the ERT's to charge ERT-like prices.

Shares of the small-cap biotech are down 49% since that warning. In fact, the majority of that loss came yesterday, after Amicus announced disappointing results for its Gaucher-disease drug candidate Plicera -- consistent with PDTBiotech's bear call.  

The bearish takeaway?
Always invest with a healthy dose of skepticism. There are certainly stocks that have the "next big thing" in their pipeline, but unless you have exceptional insight in identifying them, there's really no need to take such long-shot bets. As Warren Buffett reminds us, "Sound investing can make you very wealthy if you're not in too big of a hurry. And it never makes you poor, which is even better."

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! 

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Healthways is a Motley Fool Stock Advisor selection, and Sprint Nextel is a choice of Inside Value. The Fool owns shares of Oracle. The Fool's disclosure policy is always the big winner.


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