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 one-star stock Palm (NASDAQ:PALM): 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, 94.8% of the 286 All-Star members who've rated Genco have a bullish opinion of the stock. In March, one of those Fools, gkratoc1, explained why the dry bulk shipper looked shipshape for the long haul:

Genco has been unfairly punished as dry bulk shipping rates reached multi-year lows in December and January after the price of oil collapsed. ... Currently trading for about half their book value, I find this company an incredible buying opportunity and well-positioned to take advantage of the recovery as international trade picks up and the movement of raw materials gets back to normal.

Including yesterday's near-15% pop, shares of Genco have nearly doubled since that call.

The bullish lesson?
Learn to be long-term greedy when others are short-term fearful. Going against the herd is never easy, but if you truly believe in a company's long-run potential, major corrections can offer the very best buying opportunities. As Warren Buffett reminds us, "Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices."

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 five-star stock Sigma Designs (NASDAQ:SIGM) may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Late last month, for instance, CAPS member dubblebubbler seemed highly skeptical over Macy's surging stock price:

I'm still willing to fight the trend (ridiculous levels of optimism over cost-cutting and "less-worse" earnings reports). This "growth trend" is not sustainable. Check out [Macy's] P/B ratio … wow. Making a bold call through the holiday season.

Consistent with that warning, shares of Macy's sank yesterday, after the department store operator posted a third-quarter loss of $35 million and forecast fourth-quarter earnings well below Wall Street's expectations, to boot.

The bearish takeaway?
Never confuse an improving price for improving prospects. As long as a company's fundamental picture remains bleak, short-term, emotionally charged run-ups can last for only so long. As Buffett observes, "For some reason, people take their cues from price action rather than from values. ... The dumbest reason in the world to buy a stock is because it's going up."

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!