Wednesday's Biggest Stock Stars

Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight a few of Wednesday'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 Wednesday, like low-rated Eastman Kodak: 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, 93% of the 422 members who've rated Myriad have a bullish opinion of the stock. Two months ago, one of those Fools, kropopkin, offered myriad reasons to buy into the biotech:

Unrealistic decline after last earnings, only because they weren't as huge as expected based on previous results. Great growth opportunity and customized therapies are definitely the future of health care. [Myriad] is a good lower priced company for this, in the same vein as the successful [Celgene (NASDAQ:CELG)].

Consistent with that call, shares of Myriad surged yesterday after handily topping Wall Street's fourth-quarter estimates.

The bullish lesson?
Learn to combine the best of both value and growth investing worlds. By seeking rapidly growing companies at cheap prices, you not only buy into a stock trading below its fair value today, but also own a business that can increase that value tomorrow. As Warren Buffett reminds us: "Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily understandable business whose earnings are virtually certain to be materially higher five, 10, and 20 years from now."

And now for the losers ...
Of course, winning isn't everything in the stock market.

Here are five of Wednesday's biggest decliners with a one- or two-star rating:  

While yesterday's drop in five-star stock UnitedHealth (NYSE:UNH) may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
In late June, for instance, CAPS member JakilaTheHunII urged Fools to swim off the Isle of Capri. Here's an excerpt:

Earnings for [Isle of Capri] have not been overly impressive over the past three and a half years and even some of their good quarters are propped up by one-time items ("hurricane insurance recoveries"). ... I believe given the risks, uncertainty, and macroeconomic climate, it is worth closer to $7.

Consistent with that warning, shares of the casino operator plunged over 15% yesterday after its first-quarter earnings came in well below analyst estimates, as consumers continued to cut down on leisure spending.

The bearish takeaway?
Always know where you're exposed. One of the most common mistakes we make as investors is underestimating how sensitive a business can be to specific economic and industry-related variables. Unless you're willing to consider all of the possible ways your stock might get killed -- both from a micro and macro angle -- 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!