Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight Tuesday's biggest gainers among the stocks with a top rating of five stars.

Without further ado:

Company

Yesterday's % Gain

Prospect Capital (NASDAQ:PSEC)

21.93%

Waste Industries (NASDAQ:WWIN)

21.76%

HMS Holdings (NASDAQ:HMSY)

15.58%

Apco Argentina

13.05%

Weyco Group

12.69%

The reason I selected the largest five-star gainers, as opposed to other big-name winners making noise on Tuesday -- like H&R Block (NYSE:HRB) -- is simple: Stocks go up all the time, but unless you were able to predict the pop, what does it matter?    

Our community of more than 78,000 CAPS Fools considers its five-star stocks the most likely to outperform the market. And so far, CAPS has indeed proved its market-beating prowess: Over the past year, top-rated stocks have returned roughly 28%.

Written in the (five) stars?
For example, all 47 CAPS All-Stars who've rated North Carolina-based Waste Industries are bulls. We even featured the waste services provider last September as one of CAPS' top insider-owned stocks.

This bull pitch -- by CAPS All-Star TMFLucky11 back in July 2006 -- offers some insight into our community's thought process:

What can I say? There's treasure in trash. I like Waste Industries' growth so far and its plans for the future. Plus, since waste collection's a necessity, the company will march on despite economic downturns. It's a small company with room to grow, and I'm always intrigued by such a matchup. The next Waste Management? We'll see.

Waste Industries is up a whopping 83% since that call. In fact, yesterday's 22% gain came after a consortium of investors -- led by founder and chairman Lonnie Poole Jr., who is also the firm's largest shareholder -- agreed to acquire the company for roughly $544 million and take it private.

The bullish takeaway? Don't be afraid to go small ... and dirty. As many Fools know, master investor Peter Lynch just loved small-cap companies with plenty of growth opportunities ahead -- especially if they offered a disagreeable service to boot. Why? Because the combination of a tiny company operating in an unglamorous sector -- like Waste Industries -- makes it a pretty good candidate for being unloved (and undervalued). 

And now for the losers ...
Of course, winning isn't everything in the stock market.

Here are Tuesday's biggest one-star decliners:   

Company

Yesterday's % Loss

Private Media Group (NASDAQ:PRVT)

14.46%

ACI Worldwide

10.14%

Rigel Pharmaceuticals (NASDAQ:RIGL)

9.97%

Firstbank

8.52%

TerreStar

6.95%

One-star stocks inspire the least confidence from our CAPS players. So while yesterday's drop in four-star stock Garmin (NASDAQ:GRMN) may have caught our community off guard, one-star stocks are fully expected to fall hard. Over the past year, CAPS' lowest-rated stocks dropped by an average of 16.6%.

Did CAPS call the fall?
Take, for instance, this Rigel Pharmaceuticals bear pitch by Tastylunch last Friday, after the company climbed more than 200% the previous trading day after announcing positive phase 2 results for its rheumatoid arthritis treatment:

[A] one day gain of 224%? I know the test results were great but you're a long way from seeing profit on your drug.

With a run up this big this quick there almost has to be at least a short term technical pullback.

After all wouldn't you like to cash in a 224% profit if you got one?

If you like what Rigel is about, buy it when it gets cheaper cuz it will soon.

Shares of the San Francisco drug company have calmed over the past two days and are, in fact, down 21% since that call.

The bearish lesson? As the wise man says, "Only fools rush in" -- small-f fools, of course. One of the deadliest mistakes an investor can make is to buy a stock simply because it has gone (or is going) up in price. By acknowledging and resisting our biological urge to buy high (with the hopes of selling even higher), we decrease the chance of being pummeled by herds of stampeding sellers when things get back to reality.  

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 and start participating. It's absolutely free -- and a lot of fun! 

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Garmin is a Stock Advisor recommendation. The Fool's disclosure policy is always the big winner.