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, such as one-star homebuilders Beazer and Hovnanian. Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 145,000 CAPS Fools considers its high-star stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 95.6% of the 4,512 members who've rated Motley Fool Stock Advisor selection NVIDIA have a bullish opinion of the stock. Just two weeks ago, one of those Fools, JDogg1985, took a graphic look at the stock: "GPU's [graphics processing units] have the potential to supplant the traditional Intel (NASDAQ:INTC)-dominated processor market. ... After a turbulent two years of bad business decisions and the recession, [NVIDIA's] stock price has fallen from a high of $40 but has huge potential."

NVIDIA has already risen by more than 20% since that call. In fact, yesterday's pop came after the Federal Trade Commission filed suit against rival Intel, in accusing the chip behemoth of anticompetitive tactics.

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, serious worries from Wall Street can lead to attractive 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 Gilead Sciences (NASDAQ:GILD) may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Last month, for instance, CAPS All-Star DarthMaul09 warned that Playboy bulls might be swimming naked:

Buyout rumors have raised the price from less than $3 to more than $4.50 in the last few days. If there was another company interested in buying [Playboy], the recent price rise probably made the purchase too expensive. If they had already acquired some stock, they will likely try to dump it before the price comes back down.

Shares of the embattled media company have already fallen by 25% since that call. In fact, yesterday's 10% plunge came on a report that Iconix Brand Group is walking away from talks to acquire the company, because of complications involved in separating the Playboy brand from the rest of its assets.

The bearish takeaway?
Never bet on a stock based purely on some buyout buzz. Buying quality stocks at bargain prices certainly makes sense, but speculating on a subpar business, in the hopes that it gets taken over, can lead to disaster if the rumored deal ends up falling through. As Buffett advises, "Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."

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!