Thursday's Biggest Stock Stars

Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight a few of Thursday'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 Thursday, like one-star stock AIG (NYSE:AIG): 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, 93.6% of the 266 members who've rated Motley Fool Hidden Gems selection IMS Health have a bullish opinion of the stock. Less than two months ago, one of those Fools, KempInTheWoods, highlighted the health care data provider as a healthy turnaround bet:

Currently undervalued. Wide moat: information on drug sales from wide variety of sources. Pharma companies have temporarily cut back on IMS's services, but longer term will have to come back to them.

IMS is already up 41% since that call. Of course, more than half of that gain came yesterday, after a pair of investment funds, TPG Capital and CPP Investment Board, said they would acquire the company for $4 billion.

The bullish lesson?
Learn to think like a business owner, not a stock trader. All sorts of noise can depress a stock's price in the short term, but the true investor is able to focus on the factors that really count over time. By buying into well-positioned companies at bargain prices, you give yourself plenty of "upside" opportunities to earn an outsized return -- like being bought out by one of the big boys.

And now for the losers ...
Of course, winning isn't everything in the stock market. Here are five of Thursday's biggest decliners with one- or two-star ratings:  

While yesterday's plunge in highly rated CVS Caremark (NYSE:CVS) may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Three months ago, for instance, CAPS member Rich1965 wrote that it was the perfect time to check out of Whole Foods:

Took my shares to the register this morning after the run. Has to see a big pullback after going up 250%. Love the store but the average buyer can get a good selection of health conscious products at regular stores now and do all of their shopping at one time.

Consistent with that warning, shares of Whole Foods plunged yesterday, after a disappointing outlook for 2010 overshadowed an otherwise solid fourth-quarter profit.

The bearish takeaway?
Implicit in a stock's price are very specific growth and risk assumptions. Therefore, it's your job as an investor to assess whether those assumptions are reasonable, given the company's competitive position going forward. As Warren Buffett reminds us, "The investor of today does not profit from yesterday's growth."

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!