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

Without further ado:


Yesterday's % Gain

Flowserve (NYSE:FLS)


Teck Cominco (NYSE:TCK)


LSB Industries


Weatherford International (NYSE:WFT)


Bank of Nova Scotia


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

Our community of more than 125,000 CAPS Fools considers its five-star stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 98% of the 692 members who've rated Flowserve have a bullish opinion of the stock. Last month, one of those Fools, sknarfnevets, seemed pretty pumped about the pump and valve maker:

I've worked for Flowserve and it's pre acquisition companies for nearly 3 decades and as long as people are driving cars, using electricity, flushing toilets, mixing chemicals, etc., Flowserve will be selling pumps, valves and seals. Additionally, Flowserve is well positioned in the nuclear markets, which is currently in a dramatic growth trend. I recommend the stock any time the P/E is under 9.5.

Consistent with that call, shares of Flowserve surged yesterday after posting fourth-quarter profit growth of 19.3% on strong demand in its energy markets.

The bullish lesson?
Always stay within your circle of competence. As CAPS' sknarfnevets demonstrates, one of the easiest ways to gain an edge on Wall Street is by sticking to businesses that you're already intimately familiar with. As value guru Mohnish Pabrai once said, "Most people, if they really think about it, have a business or an industry or two that they understand very well. ... People get into trouble when they work in a bank and they want to invest in Google."

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

Here are five of Thursday's biggest one-star decliners:  


Yesterday's % Loss

Ambac Financial (NYSE:ABK)


Ryland Group (NYSE:RYL)






Vornado Realty Trust


While yesterday's plunge in five-star health insurer UnitedHealth (NYSE:UNH) may have caught our community off-guard, one-star stocks are fully expected to fall hard.

Did CAPS call the fall?
Last week, for instance, CAPS member TSIF built this convincing bear case against Ryland Group:

Ryland seems to have escaped the brunt of the downdraft the last few months. Homebuilding, mortgage finance company, based in California. These three reasons enough for you for a red thumb? Inventory and debt appear to be holding on paper, but cash flow negative and dividend cut by 75%. Their turn will come.

With the help of yesterday's drop, shares of the California-based homebuilder are down 12% since that call.

The bearish takeaway?
Never confuse a resilient price for a resistant business. As long as a company's underlying financials continue to deteriorate, it's only a matter of time before the stock price starts to reflect it. By doing your own homework and ignoring Mr. Market's current opinion, as TSIF demonstrates, you give yourself a better chance of coming to a more realistic view of a company's risk/reward profile.

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!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Bank of Nova Scotia is a Motley Fool Income Investor pick. Google is a Rule Breakers recommendation. UnitedHealth is a selection of Inside Value and Stock Advisor, and the Fool owns shares of it. The Fool's disclosure policy is always the big winner.