Tuesday's Biggest Stock Stars

Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight a few of Tuesday'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 Tuesday, like low-rated STEC: 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, 98.5% of the 1,568 members who've rated Motley Fool Rule Breakers recommendation Mindray Medical have a bullish opinion of the stock. In late February, one of those Fools, Northville, helped our community members keep their minds on the health-care-equipment maker: "Think about this for a second. [Mindray] sells medical devices into China, an underdeveloped country with the world's largest population which has just announced a plan to improve their healthcare system. Even if this was [Mindray's] only market, at a P/E in line with the industry average the possibilities for leaving the market in the dust over the next few years are enormous."

Shares of Mindray have risen by an impressive 88% since that pitch. In fact, yesterday's market-bucking pop came after the company's second-quarter profit surged 37%, driven by strong sales in China -- consistent with Northville's call.

The bullish lesson?
Learn to combine the best of both value and growth investing worlds. As long as you make it a point to never overpay for growth, then buying into profitable innovators with ever-expanding market opportunities -- a la Mindray -- is a proven way to rake in market-thumping gains. As Warren Buffett recommends, "Put together a portfolio of companies whose aggregate earnings march upward over the years, and so also will the portfolio's market value."

And now for the losers ...
Of course, winning isn't everything in the stock market. Here are five of Tuesday's biggest decliners with a one- or two-star rating:   

While yesterday's drop in five-star stock Berkshire Hathaway (NYSE:BRK-A) may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Just last week, for instance, CAPS member PaloAltanFool warned that AIG's surging price might only be the sound of shorts getting squeezed: "Hmm ... a mortally wounded stock suddenly rises due to investors having to buy shares to cover their shorts which fell flat due to a large reverse split [see WSJ article]. This stock is certainly not rising anymore, unless that earnings report on Friday has some sort of miracle in it."

After yesterday's double-digit drop, PaloAltanFool is off to a good start with that bear call.

The bearish takeaway?
Never confuse a better-looking price for a better-looking business. As long as a company's financial picture continues to deteriorate, short-term, non-fundamental price runs can last for only so long. As Benjamin Graham famously 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!