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:


Yesterday's % Gain

Arris Group


Lufkin Industries (NASDAQ:LUFK)


Sigma Designs


Genco Shipping & Trading (NYSE:GNK)


Freeport-McMoRan (NYSE:FCX)


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 Sirius XM (NASDAQ:SIRI). 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, 97.7% of the 652 members who've rated Lufkin Industries have a bullish opinion of the stock. Just last week, one of those Fools, fdude71, explained why the oil and gas equipment company looks like a tasty turnaround play: "Good company. No debt... good P/E and nice dividend. This would be a LONG hold... but it will outperform when (and it's not an "if") oil prices go up again."

Consistent with that call, shares of Lufkin surged yesterday after the company's fourth-quarter results topped Wall Street's expectations on strong sales from North Africa and the Middle East.

The bullish lesson?
Learn to pounce on Mr. Market's short-sightedness. As fdude71 understands, beaten down stocks aren't always easy to jump into, but if you truly believe in a company's long-term tailwinds, significant slowdowns are the best time to buy. Like 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 Thursday's biggest one-star decliners:  


Yesterday's % Loss

Strayer Education (NASDAQ:STRA)




Hovnanian Enterprises


Capital One Financial (NYSE:COF)


General Growth Properties


While yesterday's plunge in five-star stock Terex (NYSE:TEX) may have caught our community off-guard, we fully expect one-star stocks to fall hard.

Did CAPS call the fall?
In late January, for instance, CAPS All-Star TheHuney urged our community to stray away from Strayer Education:

I'm absolutely baffled by the market's valuation of this one. Even if I assign them an extremely low cost of capital (8%), assume they'll earn $8 per share in free cash flows for the next three years and have a 5% growth rate in FCFs for the rest of eternity after that, I still only come up with a valuation of $178. ... If that weren't enough, I think the for-profit education industry will experience some pain soon. ... If I had to give my own valuation, I'd go with something closer to $100-120.

Not surprisingly, shares of the education provider plunged yesterday, after management issued a disappointing outlook for the first-quarter -- just as CAPS' TheHuney had warned.

The bearish takeaway?
Implicit in a company's stock price are very specific cash flow assumptions. Therefore, as TheHuney masterfully demonstrates, one of your most important jobs as an investor is to determine whether those assumptions are justified. After all, any company can pop in the short term, but if expectations aren't rooted in economic reality, it's just a matter of time before your rocket stock "turns torpedo."

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. Sigma Designs is a Motley Fool Rule Breakers selection. Strayer is a former recommendation of Stock Advisor. The Fool owns shares of Terex. The Fool's disclosure policy is always the big winner.