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 top ratings of four or five stars:

There's a reason I selected those notable gainers, as opposed to other winners making noise on Wednesday, like low-rated Yahoo! (NASDAQ:YHOO): 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, 92.6% of the 1,726 members who've rated SanDisk have a bullish opinion of the stock. One year ago, one of those Fools, LodestarX2, explained why the flash memory chip maker was worth storing for the long haul:

Yes, the Samsung deal falling through, horrible quarter, and the short term outlook brought this stock down to single digits. But fundamentally, we're still looking at a stock with proprietary assets (IP), great distribution channel, and the #2 position against [Apple's] mighty IPOD. ... NAND prices can't stay down infinitely.

One year later, and SanDisk is up an amazing 190%. In fact, yesterday's pop came after the company's quarterly profit easily topped Wall Street estimates on strong sales growth -- consistent with LodestarX2's bullish logic.

The bullish lesson?
When the stock of a quality company takes a beating, always try to figure out why. If Mr. Market's punishment seems to make no sense, given the market's long-term demand profile, it might be the perfect time to jump in. In Warren Buffett's words, "Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it."

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

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

While yesterday's drop in highly rated Intuitive Surgical (NASDAQ:ISRG) may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Late last year, for instance, CAPS All-Star epmccart warned Fools not to climb aboard any of the legacy airlines:

Besides the laundry list for not investing in airlines at all (umm, let's see: oil money, less spending money in a recession, huge overhead costs, terrorism fears, etc...), the big airlines -- Continental, United, [Delta], and the like -- have been dragging for years. And now they have fresh competition even WITHIN the industry.

In line with that warning, shares of several airline stocks dove sharply yesterday after both Continental and AMR posted wider-than-expected quarterly losses, while oil prices continued to spike.

The bearish takeaway?
Learn to protect your portfolio from airsickness. Unless you're completely confident that a given airline can indeed sustain superior returns on capital -- be it through differentiation or a low-cost structure -- the industry's cutthroat nature makes it difficult to earn a decent long-term buck. In Buffett's words, "You've got huge fixed costs, you've got strong labor unions, and you've got commodity pricing. That is not a great recipe for success."

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!