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 why I selected notable five-star gainers, as opposed to other big-name winners making noise on Thursday, like low-rated Symantec (NASDAQ:SYMC). 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.

Written in the (five) stars?
For example, all of the 109 All-Star members who've rated Covance have a bullish opinion of the stock. Last month, one of those Fools, Gumfactor, helped bring the drug-development services provider to our community's attention:

Pummeled. Absolutely pummeled. From $100 to $40 this year. But the company remains solid in every respect, and is almost guaranteed a comeback. Not to mention that the biotech sector is seeing some action as a hedge against a recession. I'm loading up on biotechs, but would probably take [Covance] either way.

Consistent with that call, shares of Covance rose yesterday after the company reported fourth-quarter results that topped Wall Street's expectations and reiterated its full-year guidance.

The bullish lesson?
Let the market be your servant; not your guide. One of the biggest mistakes investors make is confusing a stock's price action with the company's underlying fundamentals, and failing to capitalize when there's a big spread between the two. As Warren Buffett, the father of value investing, once wrote, "Look at fluctuations as your friend, rather than your enemy -- profit from folly rather than participate in it."  

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 machinery stocks Terex (NYSE:TEX) and Manitowoc may have caught our community off guard, one-star stocks are fully expected to fall hard.

Did CAPS call the fall?
In April, for instance, CAPS member nickdab was already painting a bearish picture of Eastman Kodak:

Kodak "missed the boat" as far as digital cameras are concerned. Now they are playing a difficult game of catchup in a market that already has a wide variety of inexpensive, quality products.

Not surprisingly, shares of the company are down a whopping 71% since that call. In fact, yesterday's 29% drop came after the company posted a fourth-quarter loss of $137 million on sinking sales and said it would cut 14% to 18% of its workforce -- consistent with nickdab's warning.

The bearish takeaway?
Make sure the megatrends are your friends. For market-beating returns, it's crucial that you position your portfolio to take advantage of massive shifts in commerce, rather than struggle against where the world is headed. As nickdab understands, buying into "buggy whip" companies disguised as bargains is one of the easiest ways to lose money in the market.

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!