Tuesday's Biggest Stock Stars

We at the Fool usually don't pay attention to day-to-day price gyrations. 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 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 our Motley Fool CAPS community to highlight yesterday's biggest gainers among the stocks with a top CAPS rating of five stars. I've also 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, as opposed to the market's biggest overall winners or even some of the most actively traded stocks -- like Motorola (NYSE:MOT) and Citigroup (NYSE:C) -- is simple: Stocks go up all the time, but unless you were able to predict the pop beforehand, what does it matter? 

Through a consensus of more than 65,000 Fools in CAPS, our community considers its five-star stocks 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, shares of Focus Media Holding, a China-based advertising company, popped 19% yesterday after it announced the close of its internal probe -- a probe that found no evidence of improper accounting.

However, this outperform pitch -- written more than two months ago -- suggests that investors really had nothing to worry about in the first place:

Let's put aside the 2008 Olympics. Even without this major event, FMCN is penetrating all channels possible in a country of more than 1.3 billion people. The notice it got from Nasdaq is no big deal considering quite a few Fortune 500 companies receive it such as Dell. They never got de-listed. This negativity is exaggerated. After 3 days of falling, a good buying opportunity presents itself. Don't miss it.

Since CAPS player qiaoyang23 made that call in July, FMCN is up an impressive 31%.

The bullish takeaway? Not all SEC probes, investigations, and/or warnings are created equal. By figuring out which ones Mr. Market has completely overreacted to, you'll be one step closer to finding a genuine bargain.

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

Here are yesterday's biggest one-star decliners:  

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

Take, for instance, this Pier 1 Imports underperform pitch found in CAPS:

I stopped by a Pier One store the other day, lured in by their big 50% off signs. Inside, I saw home furnishings about the quality of Target's new stuff, at twice the price, with designs that I felt [were] much less attractive. I know these guys have a new CEO, and they're trying to turn it around, but I don't see that happening near-term.

The Fort Worth, Texas-based home furnisher is down 30% since CAPS All-Star ajfabb penned that pitch just three weeks ago. In fact, the stock has plummeted 25% over the last two days on a string of analyst downgrades. 

The Foolish lesson? Oftentimes, it pays to trust your own instincts as a consumer. If you can't even bring yourself to purchase a company's merchandise (due to inferior price, quality, etc.), purchasing the company's shares may not exactly be a logical thing to do.  

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, tens of 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. It's absolutely free -- and a lot of fun!