Wednesday'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's 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 Ford Motor (NYSE:F) and Research In Motion (NASDAQ:RIMM) -- 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, Albemarle, a Richmond, Va.-based chemical company, currently has 53 CAPS All-Stars who are bullish on the stock, without a single bear in sight.

This outperform pitch -- found on Albemarle's CAPS page -- helps explain why:

This company has been a great performer although it's very volatile and has always been volatile. Among its chemicals are those necessary to refine oil that have a high sulfur content. ... They do have high debt but this is normal for the industry and I think they are worth the risk of a less than stellar balance sheet.

Since CAPS player TMF1000 made that call in July 2006, Albemarle has returned a massive 103%.  

The bullish takeaway? Don't be frightened by a little volatility. The real meaning of risk is the possibility of permanent loss -- not how furiously a stock moves up and down. As master investor Peter Lynch once said, "The key to making money in stocks is not to get scared out of them."    

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 Fremont General underperform pitch found in CAPS: "Subprime mortgage! Enough said."

The Santa Monica, Calif.-based subprime lender is down 60% since CAPS player Haventaclue1 penned that short, but super sweet pitch in July.

The bearish lesson? Keep your investing simple. Sometimes, the most compelling (and logical) stock arguments can be made in four words or less -- especially when two of them happen to be the words "subprime" and "mortgage."   

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!