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Monday's Biggest Stock Stars

By Brian D. Pacampara, CFA - Updated Apr 5, 2017 at 8:03PM

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Yesterday's market is today's road map.

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

Without further ado:

Company

Yesterday's % Gain

Cemex (NYSE:CX)

28.24%

Chesapeake Energy (NYSE:CHK)

24.38%

NYSE Euronext (NYSE:NYX)

22.53%

Arch Coal

19.78%

Freeport-McMoRan (NYSE:FCX)

19.11%

There's a reason why I selected notable five-star gainers, as opposed to other big-name winners making noise on Monday, like low-rated automakers General Motors (NYSE:GM) and Ford. 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 719 All-Star members who've rated Motley Fool Stock Advisor and Global Gains selection Cemex have a bullish opinion of the stock. Late last month, one of those Fools, dibble905, explained why the Mexican cement supplier seemed solid enough to buy:

With every developing country government now committing to large infrastructure projects to boost economic spending, I am pondering as to how the world's largest building materials supplier is only trading 15% above its 52-week low (or alternatively, 86% lower than it's 52-week high).

Cemex is already up a whopping 122% since that call. In fact, yesterday's pop came on hopes that President-elect Barack Obama's infrastructure plan would boost sales for the cement maker.

The bullish lesson?
Learn to pounce on Mr. Market's short-sightedness. Turnarounds aren't always easy on the stomach, but if you truly believe in a company's long-term tailwinds, significant stock market downturns are absolutely the best time to buy. As Warren Buffett once remarked, "Only for short-term investors and market timers is a correction not an opportunity."

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

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

Company

Yesterday's % Loss

Unisys

11.86%

NewStar Financial

8.74%

Brunswick (NYSE:BC)

8.33%

Blyth

8.27%

Colonial Bancgroup

7.97%

While yesterday's drop in five-star stock Tata Motors (NYSE:TTM) 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?
In April, for instance, CAPS All-Star shop1 shared these bearish thoughts on Brunswick:

Apparently billiards, boats and bowling aren't the best combination. ... The companies EPS, revenue and net income have been faltering for awhile now. ... The fact that [Brunswick's] stock is selling well below book doesn't appear to be attracting investors. [Brunswick] will have to make some significant changes to turn this company around.

Not surprisingly, shares of the recreational products maker are down a depressing 79% since that call.

The bearish takeaway?
Always beware of book value "value traps." Book value is often used as a rough estimate of a company's "floor," but many times a company's assets are worth far less than what they say on the balance sheet. As shop1 correctly pointed out, deteriorating fundamentals, coupled with a less-than ideal environment for recreational assets, made Brunswick's stated book value -- along with its share price -- pretty tough to bank on.

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!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Chesapeake Energy is a Motley Fool Inside Value pick, NYSE Euronext is a Rule Breakers choice, and Tata Motors is a selection of Global Gains. The Fool owns shares of Cemex. The Fool's disclosure policy is always the big winner.

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Stocks Mentioned

General Motors Company Stock Quote
General Motors Company
GM
$38.46 (1.34%) $0.51
Freeport-McMoRan Inc. Stock Quote
Freeport-McMoRan Inc.
FCX
$31.67 (0.86%) $0.27
Chesapeake Energy Corporation Stock Quote
Chesapeake Energy Corporation
CHKA.Q
NYSE Holdings LLC Stock Quote
NYSE Holdings LLC
NYX.DL
Tata Motors Stock Quote
Tata Motors
TTM
$29.76 (-3.50%) $-1.08
CEMEX, S.A.B. de C.V. Stock Quote
CEMEX, S.A.B. de C.V.
CX
$4.53 (0.22%) $0.01
Brunswick Corporation Stock Quote
Brunswick Corporation
BC
$83.89 (2.58%) $2.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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