Tuesday's Biggest Stock Stars

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:

There's a reason I selected those notable gainers, as opposed to other winners making noise on Tuesday, like low-rated AIG (NYSE:AIG). 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, 97% of the 490 members who've rated ClickSoftware have a bullish opinion of it. Just two weeks ago, the workforce and service management software specialist happened to pass WallyGreenblatt's test for soundness:

I screened 3000 stocks listed in the US and Europe and selected stocks that are cheap (low PE), good quality (high ROE), have a solid balance sheet (no debt, current ratio). I used the Fool's stock screener for the US part -- good tool by the way. ... [A]s far as I can understand it (I work in the software industry), the product is good as well.

Following yesterday's pop, WallyGreenblatt is off to a strong start with that call.

The bullish lesson?
Learn how to build your own screen machine. As long as your parameters are well-defined, rooted in logical reasoning, and, most importantly, proven to outperform, "mechanical investing" can be a powerful way to pick stocks. After all, even the great Benjamin Graham used his own special sauce of a screen to single out bargain-basement businesses.

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:  

While yesterday's plunge in five-star stock GigaMedia may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Just last month, for instance, CAPS All-Star mrindependent predicted that Pinnacle was approaching its peak:

Pinnacle entertainment operates seven casinos -- most in the United States, but none in Las Vegas. Its management has been recklessly expanding for the past five years despite the fact that the company is a perpetual money loser. I don't see any way the company can pay its debts.

Including yesterday's market-bucking loss, shares of the regional casino operator are trailing the market by 12 points since that warning.

The bearish takeaway?
Learn to avoid growth when it goes absolutely wild. When things are going great, it's easy to become complacent as an investor, but mrindependent understands that that's precisely when you need to make sure management's ambitions aren't getting in the way of sustainable growth. As Warren Buffett reminds us, "You only find out who is swimming naked when the tide goes out."

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 retire wealthy.

Log in to CAPS today and start participating. It's absolutely free -- and a lot of fun!