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 four or five stars.

Without further ado:


Yesterday's % Gain

AgFeed Industries (NASDAQ:FEED)


Northgate Minerals


Coeur d'Alene Mines


American Eagle Outfitters (NYSE:AEO)


Apollo Investment


There's a reason why I selected those notable gainers, as opposed to other winners making noise on Monday, like low-rated AMD (NYSE:AMD). 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, 98% of the 579 members who've rated AgFeed have a bullish opinion of the stock. Just last week, one of those Fools, bcnu6, explained why the Chinese animal feed maker looked healthy enough to chew on:

The company focuses on increasing the efficiency of pork production in China, particularly through improved diet. P/E and Price to Cash Flow are well below industry levels. The company is raising cash "for the development of its genetic program and other growth initiatives" while keeping debt low. The company has a very good management team.

Consistent with that call, shares of AgFeed popped yesterday after it posted first-quarter profit ahead of expectations, and forecast higher hog prices by autumn on the accelerating Chinese economy.

The bullish lesson?
Learn to combine the best of both value and growth investing strategies. By seeking rapidly growing companies at cheap prices, you not only buy into a stock trading below its fair value today, but also own a business that can increase that value tomorrow. As Warren Buffett reminds us, "Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now."

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


Yesterday's % Loss



Capital One Financial (NYSE:COF)


Prudential Financial (NYSE:PRU)


Hartford Financial (NYSE:HIG)


XL Capital


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

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

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.

Consistent with that warning, shares of DryShips continued to fall for the third straight trading day after announcing its third equity offering -- which it said could be dilutive for shareholders -- in the past few months.

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 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. USG is a Motley Fool Inside Value pick. Petrobras is a choice of Income Investor. The Fool owns shares of American Eagle. The Fool's disclosure policy is always the big winner.