Thursday's Biggest Stock Stars

We at The Fool usually ignore 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 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, as opposed to the market's biggest overall winners or even some of the most actively traded stocks -- like General Electric (NYSE:GE) and Micron Technology (NYSE:MU) -- is simple: Stocks go up all the time, but unless you were able 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, T-3 Energy Services, a Texas-based manufacturer of drilling equipment, has 45 All-Star supporters and only one bearish detractor.

This outperform pitch -- found on T-3 Energy Services' CAPS page -- gives us a sense of what the Foolish bulls have been sniffing all along:

Since the beginning, their financials have been somewhat difficult due to the typical problems that come with lots of acquisitions, coupled by a slow oil market, management changes, etc. But that was history, and now, it's time for TTES to get the payoff for being in the right place at the right time, with the right management and increasing market share.

Since CAPS All-Star stockpower made that call just 10 months ago, T-3 Energy Services has returned an outstanding 90%.  

The bullish takeaway? Any investor can spot a business that's falling on hard times. It's more important to figure out why. If you conclude that a specific stock is being beat down by temporary problems, you might be looking at a tremendous turnaround opportunity.  

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

Take, for instance, this Home Solutions of America underperform pitch found in CAPS:

The real truth, I think, comes out when you look at the cash flows: Operating CF is a [$]-15.7M [trailing 12 months from Q1 2007] and [adjusted] Free CF is a [$-29.3] M [trailing 12 months from Q1 2007]. And, did I mention the fraud? This one's gonna be washed away by the hurricane surge that will certainly engulf them when their scandalous ways are finally known to the general public and its investors. Big thumbs down!

The Dallas-based restoration and construction company is down 34% since All-Star TheGarcipian penned that fevered pitch last July.

The bearish lesson? Cash is king. Whereas GAAP earnings often tell the story that management wants you to hear, free cash flow tells it like it really is.

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 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!