Tuesday's Biggest Stock Stars

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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.

Without further ado:

Company	Yesterday's Gain
Zoltek (Nasdaq: ZOLT)	6.87%
SanDisk (Nasdaq: SNDK)	3.97%
Frontline	3.74%
Walgreen (NYSE: WAG)	3.60%
Costco Wholesale (Nasdaq: COST)	3.12%

There's a reason why I selected those notable gainers as opposed to other winners making noise on Tuesday, like one-star stock Human Genome Sciences (Nasdaq: HGSI): 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, 94% of the 767 members who've rated Zoltek have a bullish opinion of the stock. In February, one of those top Fools, JakilaTheHun, took a contrarian attitude toward the carbon-fiber maker:

At current prices, it appears as if the market believes that [Zoltek] will remain unprofitable indefinitely or that investors believe that there will never be demand for carbon fiber for wind turbines … Even if demand for wind turbines stays suppressed, carbon fiber has other uses and [Zoltek] is the lowest-price player in this arena. But there's not a lot of evidence that demand for wind turbines has declined at such a rate to lead one to believe the entire industry will collapse.

Following yesterday's pop, shares of Zoltek are up 57% since that call.

The bullish lesson?
When an attractive business takes a beating, always try to figure out why. If Mr. Market's punishment seems to make no sense, given the company's long-term supply/demand outlook, it might be the perfect time to jump in. As Warren Buffett recommends, "Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results."

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:   

Company	Yesterday's Loss
Hemispherx Biopharma (NYSE: HEB)	9.91%
Borders Group	5.95%
Sprint Nextel (NYSE: S)	4.70%
Advanced Battery Technologies	3.22%
Palm	2.40%

While yesterday's drop in five-star stock Manitowoc may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
In June, for instance, CAPS member kropopkin seemed highly skeptical of Hemispherx's swine-flu-fueled stock price:

There is so much pumping on little hard evidence, and a lot of smoke and mirrors being used here. Also, a large boost to the price based on the swine flu adjuvant aspect, where as it seems lost on the masses that possible FDA approval is for [chronic fatigue syndrome] and not a vaccination adjuvant.

After yesterday's drop, shares of the development-stage biotech are already down more than 20% since that call.

The bearish takeaway?
Always invest with a healthy dose of skepticism. There are certainly stocks out there 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 Buffett tells it, "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, 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!