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 low-rated Trina Solar. 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, 96.6% of the 4,333 members who've rated Ctrip have a bullish opinion of the stock. In late December, one of those Fools, tuckman52, explained why the Chinese online travel company would continue to stay in flight:

Market sentiment is very negative for China right now. … However, this company has no debt, and a significant lead in a nascent industry -- all in what will become the world's leading economy. … I believe this company will grow 20%/year for at least the next five years.

Shares of Ctrip are up an impressive 85% since that call. In fact, yesterday's pop came after the company posted quarterly revenue and profit growth of 18% and 23%, respectively -- consistent with tuckman52's forecast.

The bullish lesson?
Learn to combine the best of small-cap and global investing strategies. By buying into top-dog small caps domiciled in attractive foreign markets, you earn the double benefit of owning a business that has plenty of room to rocket, while getting paid in non-U.S.-denominated cash flows. As long as you're cognizant of price, international small caps offer a great way to play both offense and defense.

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 E*Trade Financial 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 jmt587 kept up with the ongoing commentary on the GM situation:

[T]heir business model and cost structure is outdated and unsustainable, and will force them into bankruptcy so they can reorganize and become a stronger company in the future. I don't think they can turn things around without bankruptcy. Management and the politicians will find the necessary steps too unpalatable until they have no choice (i.e. forced by a bankruptcy judge).

Consistent with that warning, shares of GM sank to their lowest level in more than 70 years yesterday on growing fears that the embattled automaker will be forced into bankruptcy within the next three weeks.

The bearish takeaway?
Never bet on a stock based purely on a bailout possibility. As CAPS' jmt587 understands, assistance from the government doesn't necessarily mean that current shareholders stand to benefit. Unless you're truly able to discount the massive dilution effects and risk exposures that still remain, buying into "zombie" institutions is strictly speculation.

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!