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 Discover Financial (NYSE:DFS). Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 135,000 CAPS Fools considers its "high-star" stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 96% of the 377 All-Star members who've rated scandal-ridden Satyam have a bullish opinion of the stock. Last month, one of those Fools, porcelain808, explained why the Indian outsourcing firm would survive its massive scandal:

The company has catered to best-of-class talent in India, helping to attract some of the best IT folks and prevent a modicum of brain drain. A super-friendly work environment and solid business model will help keep [Satyam] afloat through the worst and then spring them ahead when the dust settles.

Consistent with that call, shares of Satyam surged more than 30% yesterday after it surprised Wall Street by managing to stay profitable in the third quarter ended last December.

The bullish lesson?
Not all scandals are created equal. By figuring out which ones Mr. Market has possibly overreacted to, you'll be one step closer to finding a genuine market-beater -- especially if the company has as much natural talent as Satyam does. As legendary investor Sir John Templeton famously said, "The time of maximum pessimism is the best time to buy."

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 five-star stock Ceradyne may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
In late April, for instance, CAPS member CharlieBombay brought Royal Caribbean's rough seas to our community's attention:

Another swine flu play. Yesterday [Royal Caribbean] and [Carnival] cancelled stops in Mexico ports. I'm assuming this is a result of a flood of cancellations and a virtual halt in new reservations.

Consistent with that call, shares of the cruise operator sank yesterday after announcing that the swine flu outbreak would indeed hurt its 2009 earnings by about $0.22 per share.

The bearish takeaway?
Always know when you're exposed. One of the most common mistakes we make as investors is underestimating how sensitive a business model can be to specific high-profile news. Unless you're willing to acknowledge all of the ways your stock might get killed -- both in the short and the long run -- there's a good chance you'll wake up one day and get blindsided.

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!