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 airlines UAL and AMR (NYSE:AMR). Stocks go up all the time, but unless you were able to predict the pop, what does it matter?   

Our community of more than 110,000 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 92 CAPS All-Stars who've rated Motley Fool Stock Advisor pick Silicon Labs, only three have a bearish opinion. Fueled by that steady support, the Texas-based semiconductor company recently regained its five-star rating.

In February, CAPS player Budsworth shared these chipper thoughts on the chip maker:

Silicon Labs is a well managed company! Definitely a long term investment, but won't disappoint. Very innovative R&D division. They know how to stay ahead of the competition. I believe they have been flat just long enough to break out and surprise us. Solid financially, full of talent, and management with an awareness of what the market demands.

Consistent with that call, shares of Silicon Labs surged yesterday after a Wall Street analyst upgraded the stock, citing a strong networking and communications market, in addition to the company's already attractive valuation.

The bullish lesson?
Just because your stock is flatlining doesn't mean it's dead. As long as your investment thesis still holds, it's crucial that you remain patient and hold onto the stock regardless of how poorly it seems to be performing. As CAPS' Budsworth understands, the time of maximum frustration is precisely the point when good stocks are priming to pop.

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 health insurers Coventry and UnitedHealth (NYSE:UNH) 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 months ago for instance, CAPS player wildepete penned this quick but lesson-packed pitch on Pier 1 Imports: "Pier One has been losing its appeal for a long time. It offers nothing unique to its store that you now can find elsewhere for higher quality or lower price."

In line with that take, shares of Pier 1 plunged yesterday after the specialty retailer posted a wider-than-expected first-quarter loss of $32.8 million.

The bearish takeaway?
Never let your portfolio get stuck in the middle. Businesses gain a competitive advantage either by selling at the lowest price, or by differentiating their product in consumers' minds. As CAPS' wildepete understands, if our portfolio is littered with companies caught between a low-cost rock and a high-quality hard place, our returns will likely get squished.

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!