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:

There's a reason I selected those notable gainers, as opposed to other winners making noise on Thursday, such as low-rated MGM (NYSE:MGM): Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 140,000 CAPS Fools considers its high-star stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 99% of the 443 All-Star members who've rated USEC have a bullish opinion of the stock. In late July, one of those top Fools, JakilaTheHun, explained why the enriched uranium provider looked like an atomic opportunity:

USEC fell almost 50% after being denied a loan guarantee by the Department of Energy for its American Centrifuge Plant. Even if I assume that roughly $500 million worth of their assets can be written down, that still leaves them with net tangible assets around $4 to $5 per share. ... I'm going to wager their valuation should be around $5-$10. At $3.50, it looks pretty good to me.

Shares of USEC have already risen by more than 40% since that call. In fact, yesterday's double-digit pop came after the company announced a contract with Exelon Generation to supply roughly $1.2 billion of uranium from its American Centrifuge Plant -- consistent with JakilaTheHun's bull stance.

The bullish lesson?
Always try to invest for the worst case. It's virtually impossible to call a stock's "bottom," but if you're confident that the risks are already baked into the price, there's a good chance your investment will turn out well over time. As Warren Buffett reminds us, "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 Monsanto (NYSE:MON) may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Just two days ago, for instance, CAPS All-Star 00100 wrote why Men's Wearhouse didn't seem suited for value Fools:

Good cash flow. Good payout ratio. Low growth. Low debt ratio. High gross margins. Very high valuation.

Consistent with that sentiment, shares of the suit and tuxedo specialist sank yesterday after a weak third-quarter profit forecast overshadowed an otherwise strong second quarter.

The bearish takeaway?
Never mistake a wonderful business for a wonderful stock. As CAPS' 00100 understands, even the greatest of companies can disappoint Wall Street if its price already reflects much of that greatness. As Buffett says, "Investors making purchases in an overheated [stock] need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid."

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 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!