Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight a few of Tuesday's biggest winners among the stocks with top ratings of four or five stars:
|
Company |
Yesterday's Gain |
|---|---|
|
ION Geophysical (NYSE:IO) |
14.10% |
|
CapitalSource |
9.97% |
|
China Fire Security Group |
7.65% |
|
Force Protection (NASDAQ:FRPT) |
6.64% |
|
Monsanto (NYSE:MON) |
5.26% |
There's a reason I selected those notable gainers, as opposed to other winners making noise on Tuesday, like low-rated priceline.com (NASDAQ:PCLN): 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, 97.3% of the 732 members who've rated ION have a bullish opinion of the stock. Just a couple of months ago, one of those Fools, A6EIntruder, explained why seismic data services present such a seismic opportunity:
You can't do [exploration & development] without this sort of information. It's a specialized, niche field whose chief human resources and assets can't be replaced over night by a competitor. I predict a wide-moat, long-term opportunity.
Following yesterday's pop, shares of ION are already up over 80% since that call.
The bullish lesson?
Always be on the hunt for massive economic moats. A sustainable competitive advantage is the best indicator of long-term success, so if you've identified one of the more powerful ones at play, you might be on to a genuine market-beater. As Warren Buffett reminds us, "The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage."
And now for the losers ...
Of course, winning isn't everything in the stock market. Here are five of Tuesday's biggest decliners with one- or two-star ratings:
|
Company |
Yesterday's Loss |
|---|---|
|
MBIA (NYSE:MBI) |
26.67% |
|
Radian Group |
11.70% |
|
MTG Investment |
8.23% |
|
Alcatel-Lucent (NYSE:ALU) |
8.08% |
|
Sprint Nextel (NYSE:S) |
5.54% |
While yesterday's drop in five-star stock ShengdaTech may have caught our community off guard, low-ranked stocks are fully expected to fall hard.
Did CAPS call the fall?
Last week, for instance, CAPS member ablengata showed skepticism over MBIA's bounciness:
I see no reason for this company to ever recover. They are heading for huge downsizing. ... I mean, they insured toxic assets! Can't get much more core to the whole world economic collapse than that.
Consistent with that warning, shares of MBIA plunged yesterday after the mortgage insurer posted a quarterly loss of $727.8 million on growing writedowns of mortgage-related securities and derivatives it covered.
The bearish takeaway?
Always identify a stock's dangers before they come back to haunt you. One of the most common mistakes we make as investors is using fuzzy, surface-level arguments to defend a stock, while completely ignoring its actual risk exposures. As Buffett simply says, "Risk comes from not knowing what you're doing."
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!





