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





Oilsands Quest (AMEX:BQI)


Comstock Resources


France Telecom


There's a simple reason I selected the largest five-star gainers, as opposed to other big-name winners making noise on Monday, such as one-star stock MBIA (NYSE:MBI). 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 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 54 CAPS All-Stars who've rated NDS Group, just one has a bearish opinion. Fueled by the Foolish support, the digital pay-television technology provider and majority-owned subsidiary of News Corp. (NYSE:NWS) has kept a five-star rating for more than six months straight.

In January, CAPS player dljames33 commented on NDS's global appeal:  

[NDS] is a pure play on the growth of the international middle class. ... And, [NDS] has [contracts] in the US, Europe, the Middle East, and increasingly in Asia (Singapore already, working on China). This means that they're not levered to the US downturn and their contracts give them a visible stream of reliable income for any impending global downturn. And, [its] books are absolutely spotless. No Debt. Crazy cash. Only thing missing is a dividend.

Consistent with that call, shares of NDS surged yesterday after News Corp., along with international private-equity firm Permira, announced plans to take the company private for $60 per share.

The bullish lesson?
Always think like a business owner. All sorts of noise can depress a stock's price in the short term, but the true investor is able to focus on the factors that really count over time. By buying well-positioned, internationally diversified, and, most importantly, cash-rich companies at good prices, you give yourself plenty of "upside" opportunities -- including being bought out by the big boys -- to earn an outsized return.

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

BancTrust Financial Group


PMI Group


Ambac Financial Group




XL Capital


One-star stocks inspire the least confidence from our CAPS players. So although yesterday's drop in five-star stock Ceradyne (NASDAQ:CRDN) 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?
Less than two weeks ago, for instance, CAPS All-Star JDSancho highlighted one of CIT Group's frightening financial ratios:

Take another look at their balance sheet. I had to refresh my browser. ... Debt/Equity = 1,180%. Wow. Can that be okay? I like to invest in companies with under 50%. ... CIT's competition on average sports a D/E of "only" 500% (look at [CapitalSource (NYSE:CSE)] or [Orix]). In this type of environment, I seek strong balance sheets. I'm not walking, but running away from this one.

Shares of the credit-services provider are already down 29% since that call.

The bearish takeaway?
Always identify a stock's risk exposures before they come back to haunt you. One of the most common mistakes we can make as investors is not paying close enough attention to a company's financial position. Unless you can reasonably conclude that a company will remain intact even under the worst of scenarios, investing in overleveraged balance sheets (with tons of unknown exposures) just isn't worth the headaches.

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!