Wednesday's Biggest Stock Stars

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

Without further ado:

There's a reason why I selected those notable gainers, as opposed to other winners making noise on Wednesday, like low-rated JPMorgan Chase (NYSE:JPM) Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 130,000 CAPS Fools considers its "high-star" stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 93.4% of the 915 members who've rated ING Group have a bullish opinion of the stock. Three weeks ago, one of those Fools, camtradr, explained why the Dutch financial services giant seems like a good bet to survive:

I consider this a risky investment given the coming gloom and doom for credit cards, HELOCs and other bank-supported credit and potential nationalization. It can probably drop even further in the near term. However, the 2.00 /share dividend and the fact that this seems like a solid and progressive bank that everyone seems [to like] for their personal savings accounts gives me some hope that it could be one of those last banks standing.

Shares of ING Group are up an impressive 70% since that call.

The bullish lesson?
Embrace the opportunities that uncertain situations provide. Many investors mistakenly believe that they can relax, wait on the sidelines, and simply jump back in when all of a company's troubles are resolved. But as Warren Buffett famously said, "The future is never clear, and you pay a very high price in the stock market for a cheery consensus. Uncertainty is actually the friend of the buyer of long-term values."

And now for the losers ...
Of course, winning isn't everything in the stock market. Here are five of Wednesday's biggest decliners with a one- or two-star rating:  

While yesterday's drop in highly rated Aflac may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Last week, for instance, CAPS All-Star digiferret predicted plenty of rough seas ahead for DryShips (despite its recent three-year contract win):

One big worry taken off their plate for three years (thank god), but there's so many more left. Considering it bounced 20% in one day, I'm initiating a short position on this, as risk of dilution is extremely high for the next few months.

In line with that warning, shares of the Greek dry bulk shipper sank yesterday, after it posted a fourth-quarter loss of $1 billion and said it expects to lose about $116 million on the cancellation of three newbuilds in the first quarter.

The bearish takeaway?
Never confuse an improving stock price for an improving business. If a company's underlying fundamentals continue to deteriorate, short-term, emotionally charged run-ups can last for only so long. By doing your own homework and ignoring Mr. Market's mood swings, like digiferret demonstrates, you give yourself a better chance of coming to a more realistic view of a company's risk/reward profile.

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 into CAPS today and start participating. It's absolutely free and a lot of fun!