Thursday's Biggest Stock Stars

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

Without further ado:

There's a reason I selected notable five-star gainers, as opposed to other big-name winners making noise on Thursday, such as low-rated DryShips (NASDAQ:DRYS). Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 120,000 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: In the first 20 months since its inception in late 2006, five-star stocks beat the market by 12 points, annualized.

Written in the (five) stars?
For example, 96% of the 176 All-Star members who've rated Motley Fool Stock Advisor pick Copart have a bullish opinion of the stock. Just last week, one of those Fools, gallunltd, explained why the vehicle-salvage service provider would keep weathering the economic storm:

It ... shows well in key statistics of ownership, debt, and margins. It has, reasonably well, held its value through this turmoil. It seems to me to have a lock on an unusual niche.

Consistent with that call, shares of Copart surged yesterday after managing to grow quarterly revenue and earnings per share 7.3% and 4.1%, respectively.

The bullish lesson?
Never underestimate the protection that a competitive moat provides. Plenty of stocks look dirt cheap right now, but, as Foolish investors, we have to first be sure that our businesses can actually withstand the downturn. As Warren Buffett recently wrote, "[I]nvestors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation's many sound companies make no sense."

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

Here are five of Thursday's biggest one-star decliners:  

While yesterday's drop in five-star stock Chesapeake Energy (NYSE:CHK) may have caught our community off-guard, one-star stocks are fully expected to fall hard: Over the 20 months since CAPS started, one-star stocks dropped an average of 11.4%, annualized.

Did CAPS call the fall?
Last week , for instance, member blitzen94 kept up with the ongoing commentary on CAPS regarding the General Motors situation:

I don't think there's a strong case for common stock shareholders seeing a gain in GM. Bailout? Bankruptcy? Neither is a great option for the lowest owners on the totem pole.

Of course, shares of the embattled GM sank yesterday on continued worries about the fate of the U.S. automakers.

The bearish takeaway?
Never bet on a stock based purely on a bailout possibility. As CAPS' blitzen94 understands, a bailout of Detroit doesn't necessarily mean that common shareholders stand to benefit. Unless you're truly able to discount the massive dilution effects that are certain to arise from the rescue plan (whatever it ends up being), buying into the Big 3 is really just a gamble.

The final Foolish move
Investors often focus strictly on stock price movements 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, above all else, 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!