Monday's Biggest Stock Stars

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 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 Monday, like newly resuscitated CIT Group (NYSE:CIT): 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, 98% of the 265 All-Star members who've rated Patriot Coal have a bullish opinion of the stock. In late April, one of those top Fools, devilinside, suggested a contrarian call on the coal producer:

They seem to have their debt under control and enough cash flow to keep them going until things do turn around. They have reduced production and are quickly reducing inventories. No industrial nation can grow without coal. There simply is no other energy source available in abundance to produce the power we need for the same cost, period.

Following yesterday's double-digit pop, shares of Patriot are up more than 110% since that call. 

The bullish lesson?
Learn 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 tells it: "The most common cause of low prices is pessimism -- sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism, but because we like the prices it produces."

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

While yesterday's drop in five-star Infinera may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
In April, for instance, All-Star thelongviewman showed skepticism over Citigroup's price performance:

I have never shorted a stock before, but this toxic bank has run up to far too fast … what has really changed in the last 4 weeks except sentiment? They are far from being out of the woods yet, and I expect the stock to retreat in the coming months.

Not surprisingly, shares of the banking giant are lagging the market by 33 points since that bear call. In fact, yesterday's drop came after a Wall Street analyst cut his earnings estimates through 2011 on mounting loan-related losses -- just as CAPS' thelongviewman had warned.

The bearish takeaway?
Never confuse a bouncing price for better fundamentals. Any stock can surge on sheer enthusiasm, but if those expectations aren't rooted in economic reality, it's just a matter of time before your rocket stock turns torpedo. As Buffett reminds us: "For some reason, people take their cues from price action rather than from values. … The dumbest reason in the world to buy a stock is because it's going up."

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!