Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight Monday's biggest gainers among the stocks with a top rating of five stars.

Without further ado:


Yesterday's Gain

Alvarion (Nasdaq: ALVR)


MercadoLibre (Nasdaq: MELI)


Rubicon Minerals


Sigma Designs (Nasdaq: SIGM)


Marvel Entertainment (NYSE: MVL)


There's a simple reason why I selected the largest five-star gainers, as opposed to other big-name winners making noise on Monday, like low-rated Advanced Micro Devices (NYSE: AMD). Stocks go up all the time, but unless you were able to predict the pop, what does it matter? 

Our community of more than 100,000 CAPS Fools considers its five-star stocks the most likely to outperform the market. And so far, CAPS has indeed proven its market-beating prowess: Over its first year, top-rated stocks returned roughly 28%.

Written in the (five) stars?
For example, of the 135 CAPS All-Stars who've rated Motley Fool Rule Breakers pick Alvarion, 96% have a bullish opinion. On the strength of that top-notch support, the Israeli provider of wireless broadband solutions has kept a perfect rating for over three months straight.

In February, CAPS player MoneyJungle1 highlighted some of the progress that management was making:

Leader in WiMax technology, the next step from Wifi. Think 30 miles vs 30 meters. ... They are creating lots of small steady revenue streams that are adding up. Revenue growth is very good. EPS is turning positive. ... Also may have some buy out potential from a big company willing to buy rather than develop WiMax technology. If not, sure and steady can still put a few bucks in your pocket.

Consistent with those comments, shares of Alvarion surged yesterday after the company's first-quarter loss narrowed, as revenue jumped 29% on growing WiMAX demand.  

The bullish lesson?
Know when to break the rules. Important emerging industries are notoriously fraught with risk, but by buying into genuine top-dog first-movers filling huge gaps in the marketplace, you can reduce your downside substantially. As CAPS' MoneyJungle1, along with our Rule Breakers team, understands, identifying disruptive technologies on the cusp of huge profitability can be a great way to multibagger returns.

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

Here are Monday's biggest one-star decliners:  


Yesterday's Loss

Citizens Republic Bancorp




Glu Mobile (Nasdaq: GLUU)


IndyMac Bancorp




One-star stocks inspire the least confidence from our CAPS players. So although yesterday's drop in highly rated American Capital Strategies (Nasdaq: ACAS) may have caught our community off-guard, one-star stocks are fully expected to fall hard. In the first year, CAPS' lowest-rated stocks dropped an average of 16.6%.

Did CAPS call the fall?
In February, for instance, CAPS player spetnaz listed several reasons to be bearish on Glu Mobile:

- slowing market growth, especially in the US
- increasing competition from powerful videogames makers ... (Eidos, Vivendi, [Electronic Arts]...) and Gameloft...
- Gameloft market cap fell by more than 50% in the last weeks, so Glu isn't as cheap as it used to be, comparatively
- I can't imagine why anyone would [choose] to invest in Glu over Gameloft, given their respective track record, future prospects and price

Shares of the small-cap publisher of mobile games are down slightly since that call, and are off about 67% over the last year.

The bearish takeaway?
Stay away from small-cap shrimps. Although it's true that tiny companies offer the market's most remarkable returns, they can also provide the largest losses if you're not careful. By ensuring that your smaller stocks all enjoy fast-growing market opportunities, are inexpensively priced, and fill a niche that's not being fought over by multibillion-dollar behemoths, you'll be well protected from these small-cap catastrophes.

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, tens of thousands of investors are Foolishly sharing insightful investment tips to help, above all else, 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!

Electronic Arts and Marvel are picks at Stock Advisor. Alvarion and Sigma Designs were chosen to appear in Rule Breakers, and American Capital is highlighted at Income Investor. Try any of these newsletter investing services free for 30 days.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool's disclosure policy is always the big winner.