Friday's Biggest Stock Stars

Here at The Fool, we usually don't pay attention to day-to-day price gyrations. Instead, we prefer to track each business' intrinsic value, which, by its very nature, changes a lot less frequently than Mr. Market's wild swings would have you believe.       

But at times, some price moves are just so big that investors should at least take notice -- especially when we Fools could have seen them coming.  

The big winners   
With that in mind, I've summoned the Motley Fool CAPS community of more than 65,000 Fools to highlight Friday's biggest gainers among the stocks with a top rating of five stars. Also, I've included a possible explanation -- where I could find one, of course -- for each move.

Without further ado:

Did CAPS predict the pop?
The reason I selected the biggest five-star gainers instead of the market's biggest overall winners or even the most actively traded stocks -- like Countrywide Financial (NYSE:CFC) and Ford (NYSE:F) -- is pretty simple: Stocks go up all the time, but unless you were able predict the pop before they do, what does it matter?    

The consensus in the CAPS community is that its five-star stocks are the most likely to outperform the market. By reverse-engineering some of the arguments made for these picks, our odds of finding the next big winner will surely improve.  

For example, Aegean Marine Petroleum Network, a Greece-based fuel logistics company, has always had consistent support from our community, and very recently regained its five-star status. Even more impressive is the fact that not a single CAPS All-Star has yet to turn bearish.    

Just take a stroll through Aegean's CAPS page and you'll find several bullish pitches that center on its heavy levels of insider ownership, extensive global network of service centers, and unique opportunity to capitalize on changing industry regulations. What's that unique opportunity, you ask? 

Back in March, CAPS All-Star NetscribeEnergy spelled it out for us Fools:

The International Maritime Organization (IMO) and European Union (EU) have banned the single hull bunkering tankers of an approximately 5940 dead weight tons (dwt) and plan to gradually ban all single hull tankers till 2010. This could generate demand for double-hull tankers and thus benefit ANW, which currently owns a fleet of ten double hull-bunkering tankers. Also, ANW has negotiated  contracts for 31 additional double hull vessels, which could enhance its current fleet size in the due course.

Aegean is up 60% since that pitch was written. In fact, Friday's 15% pop came after an analyst "buy" rating that included many of the same arguments found in Netscribe's note.

The Foolish takeaway? Keep your eyes open for major regulatory changes within a given industry. By figuring out the companies that stand to benefit most from specific developments (and before the market does), you'll have a clear advantage in generating an excess return.

Now for the losers
Of course, winning isn't everything in the stock market. Stocks go down, too -- often very, very fast.

Here are Friday's biggest one-star decliners:   

Did CAPS call the fall?
Fools believe five-star stocks will outperform; one-star stocks inspire the least confidence from our CAPS community. By investigating a few bearish arguments made for these losers, we should have a better chance of averting portfolio disaster in the future.   

Take, for instance, this underperform pitch about Trex found in CAPS:

Housing industry: negative.

Home improvement market: positive.

Great product, but 60 times earnings? If forward EPS growth is not consistently 25% or more [the stock is] way overvalued.

The Virginia-based producer of decking and railing products is down 47% since chuckmunger penned that poetic pitch in January. As a matter of fact, things have turned out gloomier than chuck had thought.

To be sure, Trex's year-to-date downtrend has been caused by weakness in both the homebuilding and remodeling sectors. Last Friday, the company announced it was suspending operations at its Olive Branch, Mississippi, facility -- cutting 115 jobs and incurring charges of $2.8 million in the process. 

Trex's fall reminds us Fools to have a good sense of what's being baked into a stock's given price. If the discounted growth assumptions don't exactly jibe with industry conditions, investors might have a huge loss coming their way.

The final Foolish move
Investors often focus strictly on stock price movements (or the results), without realizing that developing a proper stock-picking process counts most.

Over at Motley Fool CAPS, thousands of investors Foolishly share 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. It's absolutely free -- and a lot of fun!