Thursday's Biggest Stock Stars

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 top ratings of four or five stars:

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

Our community of more than 140,000 CAPS Fools considers its high-star stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 96.3% of the 2,717 members who've rated Motley Fool Rule Breakers pick Akamai have a bullish opinion of the stock. In late July, one of those Fools, PaloAltanFool, pressed our community to pounce on some second-quarter softness:

One weak quarter is no reason for a business to drop 20% in a couple minutes. Akamai has a pretty deep moat in that companies are often unwilling to go with a smaller, less-reliable [content delivery network]. Akamai is more or less the industry standard. I see growth prospects, I see a moat, I see a depressed price.

Akamai is already up 37% since that call. In fact, yesterday's double-digit pop came after the company's third-quarter profit slipped 2% and still managed to blow out expectations -- consistent with PaloAltanFool's bargain-based reasoning.

The bullish lesson?
Learn to be long-term greedy when others are short-term fearful. Going against the herd is never easy, but if you truly believe in a company's long-run earnings power, massive panic sell-offs can offer the very best points of entry. As Warren Buffett reminds us, "Only for short-term investors and market timers is a correction not an opportunity."

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

Here are five of Thursday's biggest decliners with one- or two-star ratings:  

While yesterday's drop in highly rated Merck (NYSE:MRK) may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
In late May, for instance, CAPS member Loken300 forecasted dark skies for First Solar bulls:

Stock is priced to perfection. Only a fool would believe that earnings will remain steady at these levels for 20 years without interruption. Also, [John Walton Estate] selling shows the true story long term. A high valuation should usually never be assessed on a company that's barely been operating for 2 years as a public company.

Shares of the solar panel maker are down 30% since that warning. In fact, yesterday's drop came after the company's 38% jump in quarterly revenue wasn't enough to satisfy Wall Street.

The bearish takeaway?
Never mistake a wonderful business for a wonderful stock. As CAPS' Loken300 understands, even the greatest of companies can disappoint Mr. Market if its valuation already reflects much of that greatness. In Buffett's words, "Investors making purchases in an overheated [stock] need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid."

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 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!