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 low-rated financials AIG and Citigroup (NYSE:C): 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 305 All-Star members who've rated ReneSola have a bullish opinion of the stock. In late November, one of those top Fools, pcstuck, explained why this solar wafer maker was a profitable way to catch some rays:

If you're looking for a long term stock, I think the solar sector is going to be the way to go. It will take a hit now in the short-term with economic struggles, but I don't think you can deny the growth potential here. The higher risk could lead to a nice reward if you stick it out.

Shares of ReneSola have more than doubled since that call. In fact, yesterday's pop came after the company landed exclusive rights to build a $706 million, 150-megawatt solar power plant in northern China -- consistent with pcstuck's bullishness.

The bullish lesson?
The most important job you have as an investor is to quantify a stock's upside and downside. At the very least, you should always make sure you're being compensated appropriately for all the risks you're taking on. If a stock's potential payoff seems generous compared to the chance of loss -- as pcstuck surmised with ReneSola -- it's best to take Mr. Market up on his offer.

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 plunge in highly-rated PetSmart may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Three months ago, for instance, CAPS All-Star mrindependent urged Fools to see the soft side of Sears Holdings:

If you have been to a Sears store in the last two years, you know why I am shorting the stock. This company simply cannot compete with the likes of [Wal-Mart (NYSE:WMT)], Target … and Best Buy. After the recent unjustified surge in retail stocks, this seems like a good time to initiate a short position.

Consistent with that bear call, shares of the ailing retailer sank yesterday after posting a surprise quarterly loss on store closings, higher pension costs, and lower sales.

The bearish takeaway?
Trust your own eyes above all else. Just as it might pay to "buy what you know" (and enjoy), it's probably a good idea to stay away from stocks whose services are increasingly disappointing you. Due diligence is always required, but if you're not a satisfied customer, it might be a stretch to think you'll be a satisfied investor. 

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!