Tuesday's Biggest Stock Stars

Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight a few of Tuesday'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 Tuesday, like one-star stock MGIC Investment. 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, 96% of the 3,176 members who've rated UnitedHealth have a bullish opinion of the stock. Two days ago, one of those Fools, accelerando, explained why the managed care provider looked healthy enough to bet on: "health care insurers battered by obamania. very unlikely anything substantial will change and these dudes will continue to rake in the cash in our sadly insane system."

Consistent with that call, shares of several highly rated health insurers surged yesterday after the government released Medicare Advantage rates for 2010 that were higher than the amount originally proposed.
 
The bullish lesson?
Be greedy when others are fearful. As long as you've done your homework and are absolutely convinced of a company's long-term, cash-generating ability, a bit of worry from Mr. Market can create perfect buying opportunities. Like Warren Buffett says, "Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised."

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

Here are five of Tuesday's biggest decliners with a one- or two-star rating:  

While yesterday's drop in highly rated blue chips Dow Chemical (NYSE:DOW) and Caterpillar may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
In February, for instance, CAPS member Option1307 urged our community to start leaving Las Vegas stocks:

Deals in Vegas are the best they have been in, well, ever. Even with this massive attempt by the casino industry to lure customers, it is to no avail. ... People are simply flat broke and are not spending money on discretionary things. ...With so many local casinos in most states now, what's the reason to travel all the way to the glorious Sin City?

In line with that bear call, shares of several low-rated gambling stocks plunged yesterday after a report showed that Nevada casino revenue dropped 18.1% in February, marking the 14th straight month of year-over-year revenue declines.

The bearish takeaway?
Move out of dangerous neighborhoods while you can. Just as companies with very little product diversification should give Fools some pause, those that are overly exposed to a few geographic regions should cause concern. When the town's in boom mode, geographic risk might seem trivial, but as the Las Vegas casinos demonstrate, any material bust in an area could sink investors in the process.

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!