Thursday's Biggest Stock Stars

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 top ratings 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 Thursday, like one-star automaker General Motors (NYSE:GM). 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, 97.9% of the 424 All-Star members who've rated engineering and construction company Chicago Bridge have a bullish opinion of the stock. In late February, one of those Fools, checklist34, urged our community to pounce on the plunging price:

I'm taking a long position this morning in the low $5s on the huge drop (~30% on 2/25/09). CBIs guidance was vague and that scared people, which has created a buying opportunity … a forward p/e (taking the worst case of what was discussed today) of 5 very controllable debt and no real chance of bankruptcy = a buy.

After yesterday's pop, shares of Chicago Bridge are up an amazing 115% since that call.

The bullish lesson?
Train yourself to be greedy when others are fearful. As long as you've done your homework and are absolutely convinced of a company's long-term earnings power, a bit of angst 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 Thursday's biggest decliners with one- or two-star ratings:   

While yesterday's drop in highly-rated Suntech Power (NYSE:STP) may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Two weeks ago, for instance, CAPS All-Star SBeren wrote the following response to a Regions Financial bull:

Stop using these terms: 'distressed conditions", "well managed", and take a look at reality for a second: They lent money out and the commercial properties that they lent money to have an obscene amount of debt (the obligations to these banks) and decreasing/immaterial cash flow from operations. Do the math.

Consistent with that warning, shares of the regional bank dropped for the second day in a row, after it announced plans to sell more than $1 billion in common and mandatory convertible preferred stock to help meet its government-required $2.5 billion capital raise.

The bearish takeaway?
Always identify a stock's risk exposures before they come back to haunt you. One of the most common mistakes we make as investors is using fuzzy, surface-level arguments to defend a stock, while completely ignoring the company's actual financial position. As Buffett simply says, "Risk comes from not knowing what you're doing."

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!