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:


Yesterday's % Gain

North American Palladium


Teck Cominco (NYSE:TCK)


Yamana Gold (NYSE:AUY)


Transocean (NYSE:RIG)


Agrium (NYSE:AGU)


There's a reason why I selected notable five-star gainers, as opposed to other big-name winners making noise on Monday, like one-star stock UBS (NYSE:UBS). Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 125,000 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, 98% of the 917 members who've rated Teck Cominco have a bullish opinion of the stock. Two weeks ago, one of those Fools, TSIF, explained why the Canadian mining company looked like an attractive proposition:

I'm betting that it's got the leverage and know-how to come up to the surface, into the sunlight. … If coal prices recover OR minerals, then [Teck Cominco] will rebound. If it can't get firm footing then it still has more assets it can break off, but I hope it doesn't come to that. At any rate, bankrupcy isn't likely from my view, and for a chance for a 2-3 bagger, I'll bite.

With the help of yesterday's pop, Teck Cominco is edging the market slightly since that call.

The bullish lesson?
Always be on the hunt for stocks priced for imperfection. It's virtually impossible to call "bottom" on a stock, but if you're confident that the risks are already baked into the price, there's a good chance your investment will turn out well. As legendary value investor Sir John Templeton famously said, "The time of maximum pessimism is the best time to buy."

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:  


Yesterday's % Loss

Raser Technologies (NYSE:RZ)


Cougar Biotechnology


CBL & Associates Properties


Ballard Power Systems




While yesterday's massive plunge in five-star stock Dow Chemical (NYSE:DOW) 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 late June, for instance, CAPS member bluedome shared these bearish thoughts over Raser Technologies' business model:

This company is all website, no products. I distrust any company that is trying to do two completely different things at once (motors and geothermal energy). Most good businessmen pick one and try to compete!
The green blanket can't protect them indefinitely from reality, someone has to give them money to burn.

Not surprisingly, shares of Raser are down 52% since that call.

The bearish takeaway?
Focus on leaders that know how to focus. As long as management insists on diversifying into unrelated industries they know nothing about -- or "diworsification" as Peter Lynch calls it -- companies always run the risk of being distracted away from their core competencies. As Warren Buffett once said, "All too often, we've seen value stagnate in the presence of hubris or boredom that caused the attention span of managers to wander. Would you believe that not a few decades back they were growing shrimp at [Coca-Cola] and exploring for oil at Gillette?"

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.

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Dow Chemical is a Motley Fool Income Investor pick. Coca-Cola is a recommendation of Inside Value. The Fool's disclosure policy is always the big winner.