Tuesday's Biggest Stock Stars

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

Without further ado:

There's a simple reason I selected the largest five-star gainers, as opposed to other big-name winners making noise on Tuesday, like one-star mortgage lenders Fannie Mae (NYSE: FNM) and Freddie Mac. 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 proved its market-beating prowess: Over its first year, top-rated stocks returned roughly 28%.

Written in the (five) stars?
For example, out of the 201 CAPS All-Stars who've rated two-time Motley Fool Rule Breakers pick IPG Photonics, only three have a bearish opinion. On the strength of that support, the Massachusetts-based laser supplier has kept a perfect rating for more than six months straight.

Last September, CAPS player Ganndalf shared this laser-focused bull pitch with our community:  

IPG is the market leader in fiber lasers, which are most definitely a disruptive technology to the more conventional lasers. ... They are exposed fairly equally to European, American, and Asian markets, so that should protect them from any serious downturn in a particular region. Profit margins are at 21%, which means this company is obviously doing something right.

Consistent with that call, shares of IPG Photonics popped yesterday after the company reported first-quarter profit growth of 23%, as strong European and Asian sales more than made up for the weakness experienced in the U.S. 

The bullish lesson?
Diversifying out of the dollar is easier than you think. Investing directly in currency-based vehicles might be a bit intimidating, but buying into high-quality, U.S.-based multinationals is a simple way to gain exposure to foreign income streams. And if the company happens to be a top-dog first-mover with disruptive technology to boot, you give yourself plenty of multibagger profit potential as well.

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

Here are Tuesday's biggest one-star decliners:   

One-star stocks inspire the least confidence from our CAPS players. So although yesterday's drop in five-star stock Ctrip.com (Nasdaq: CTRP) 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?

Just a few weeks ago, for instance, CAPS All-Star YoungInvestor99 explained why Playboy Enterprises has no clothes:

$241 million is a very generous valuation. Maybe they would get more than that if they sold their business simply because of their brand, but as a business, they are done. ... Their business model died with the birth of the internet. Pictures of women used to be exclusive to publications such as playboy, which gave them a nice moat. ... now they are a dime a dozen on the internet and that moat disappeared.

Right in line with that bearish take, shares of Playboy plunged yesterday after the adult-entertainment publisher posted a first-quarter loss of $3.1 million, as management continues to cope with "unprecedented change in the way consumers access and use media content."  

The bearish takeaway?
Block your portfolio from buggy-whips. Whenever new technology gets introduced into our lives, there's always the chance that it might disturb, disrupt, and even completely revolutionize the nature of a particular business. By ensuring that your portfolio consists of businesses positioned to take advantage of consumer trends, rather than be replaced by them, your odds of sidestepping huge losses are that much better.

The final Foolish move
Investors often focus strictly on stock-price movements without realizing that developing a proper stock-picking process counts the most.

Over at Motley Fool CAPS, 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! 

IPG Photonics and Playboy are both Rule Breakers recommendations, and The Motley Fool owns shares of IPG. Omniture is a Stock Advisor pick, and Motley Fool Hidden Gems has recommended both Ctrip and Sun Hydraulics.

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