Thursday'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 rating of five stars.

Without further ado:

The reason I selected the biggest five-star gainers, as opposed to the market's biggest overall winners or volume leaders -- like Level 3 Communications (NASDAQ:LVLT) -- is simple: Stocks go up all the time, but unless you were able predict the pop beforehand, what does it matter?  

Did CAPS predict the pop?
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, Immucor, the Georgia-based provider of blood-testing equipment, has had more than 100 CAPS All-Stars call outperform on its stock, while a measly three have been bears.

This outperform pitch, written by CAPS player GGGilmore in November of 2006, gives us an idea of why it's been so attractive:

Good growth in sales & profit. Great balance sheet -- enough cash to pay all short & long term liabilities using just half its cash. Definitely in a field of growing need. Using its lowest P/E for 2006 times 2007 earnings, this stock is priced the lowest it will be anytime in 2007 -- that's worst case scenario. I'm looking at $35 a share by this time next year.

Immucor has returned 51% since that call was made, and currently trades at $39/share -- even better than Gilmore had predicted.

The bullish takeaway? Try to capture all of the different scenarios into your valuation work. If the stock is still cheap even under the most pessimistic of circumstances, then you're probably staring at one potent proposition.   

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'll have a better chance of averting portfolio disaster in the future.  

Take, for instance, this BankUnited underperform pitch found in CAPS:

This is interesting. GAAP requires that interest income from negatively amortizing loans be in the statement of cash flows. In its last 10-Q, BKUNA only provides the total for cash flow used in operating activities. To find the negative amort. interest income you have to go to the bottom of the 10-Q. Once you find it, you realize they didn't really make any money last Q. And that's not good unless you believe those option ARMs (adjustable rate mortgage) are really high quality.

The Florida-based lender is down 38% since CAPS player TMFDoraemon penned that timely pitch last March.

The bearish lesson? Never forget the fine print. The true health of company can often only be found buried beneath the surface. It might be a tad tedious to read through all the small stuff, but if just one questionable bit of info raises a red flag (and thus prevents you from losing money), then it's more than worth the effort.   

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!