Friday's Biggest Stock Stars

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

Without further ado:

There's a reason I selected those notable gainers, as opposed to other winners making noise on Friday, like low-rated AIG (NYSE:AIG): Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 135,000 CAPS Fools considers its "high-star" stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 92.8% of the 1,798 members who've rated Motley Fool Rule Breakers recommendation Hansen Natural have a bullish opinion of the stock. Just two weeks ago, one of those Fools, BMunkers, explained why the energy-drink specialist still had monstrous potential:

I love Monster Energy drinks for starters. The stock price is down quite a bit from its 52 week high without reason. ... This is similar to [Coca-Cola (NYSE:KO)], in respect to the fact that people still want their soft drinks no matter the economy. Coke is also helping distribute Hansen products now.

Consistent with that call, shares of Hansen surged on Friday, after the company posted quarterly earnings that met Wall Street estimates, on the back of strong sales from its Monster Energy drink.

The bullish lesson?
Learn to profit from your surroundings. As CAPS' BMunkers understands, there's no better way to gain an edge on Wall Street than to pay attention to the multibaggers lurking in our own everyday lives. As Peter Lynch tells it, "So often we struggle to pick a winning stock, when all the while a winning stock has been struggling to pick us."

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

Here are five of Friday's biggest decliners with a one- or two-star rating:  

While Friday's drop in highly rated gold miner Yamana may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
In June, for instance, CAPS member jed71 warned Fools about the risks within PMI's portfolio:

This company is in a bunch of trouble. Large exposure to alt-A and [no document] loans in their portfolio. They do not have the cash to continue operations over the long term. Best case is buyout at fire sale prices -- but no one wants [mortgage insurance] exposure in this market.

Consistent with that warning, shares of the embattled mortgage insurer plunged by more than 20% Friday, after it posted a wider-than-expected quarterly loss of $222.6 million -- more than enough to raise fresh concerns over its financial position.

The bearish takeaway?
Always identify a stock's dangers before they come back to haunt you. One of the most common mistakes we make as investors is using fuzzy, surface-level arguments to defend a stock, while completely ignoring its actual risk exposures. As Warren Buffett simply says, "Risk comes from not knowing what you're doing."

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!