Thursday's Biggest Stock Stars

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

Without further ado:

There's a simple reason why I selected the largest five-star gainers, as opposed to other big-name winners making noise on Thursday, like one-star mortgage lender IndyMac Bancorp (NYSE:IMB). Stocks go up all the time, but unless you were able to predict the pop, what does it matter?

Our community of more than 105,000 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, out of the 87 CAPS All-Stars who've rated Yucheng Technologies, only three have a bearish opinion. Fueled by that Foolish support, the Beijing, China-based provider of IT services recently earned its first-ever five-star rating.

Last September, CAPS All-Star johnnykillz explained why Yucheng was a bankable opportunity:

a p/e of 10 and a booming economy. What's up with these undernoticed Chinese small caps? A little more than book value for a company that provides e-banking solutions in a country where this is rolling out at hyper speed. Mr. Market has obviously slumbered on these non [solar energy] Chinese stocks. "The rise of the Chinese middle class" indeed.

Yucheng is up a nice 30% since that call. In fact, yesterday's pop came after the company signed a major contract with China Construction Bank to provide point-of-sale merchant acquiring services -- consistent with johnnykillz's outperform case.

The bullish lesson?
Always pay attention to what Wall Street seems to miss. No matter how expensive a particular asset class, sector, or country might seem on the surface, there are often bargains to be had if you're willing to look in less obvious places. As CAPS' johnnykillz understands, searching in the deep small-cap corners of China is one of the few ways to find value in the country.

And now for the losers ...

Of course, winning isn't everything in the stock market.

Here are Thursday's biggest one-star decliners:  

One-star stocks inspire the least confidence from our CAPS players. So although yesterday's drop in highly rated Akamai Technologies (NASDAQ:AKAM) 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?

Two days ago, for instance, CAPS All-Star tenmiles commented on the news surrounding Spectrum Brands:

Up on news they are selling pet foods line; still think this debt laden consumer products company is a relative dog -- shorts likely to shave off some of today's gains when dust settles.

Consistent with that call, shares of the personal-products maker plunged yesterday as Moody's placed Spectrum's non-investment grade ratings on review, in response to the planned sale of its pet business.

The bearish takeaway?
Never get swayed by short-term optimism. As long as you continue to remain unimpressed with a company's underlying fundamentals, it's often best to stick to your long-term thesis and not become too affected by day-to-day swings of sentiment. As Benjamin Graham once said, "In the short run, the market is a voting machine, but in the long run, it is a weighing machine."

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, 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!