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 one-star stock Crocs. Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 145,000 CAPS Fools considers its high-star stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 94.7% of the 623 members who've rated NorthStar Realty have a bullish opinion of the stock. Just last month, one of those Fools, jdmballm, explained why the real estate finance company was a real steal:

How is a stock that is still paying a $0.40 dividend and have a P/E of less than 1 not on everybody's radar? Because it's a REIT and all of them are going to go bankrupt right? Wrong.

Including yesterday's double-digit pop, shares of NorthStar are already up 48% since that call.

The bullish lesson?
Take advantage when Mr. Market throws a good baby out with the bathwater. When things get shaky, investors tend to sell stocks haphazardly, based simply on the sector they belong to, rather than analyzing fundamentals on a case-by-case basis. But as Warren Buffett says, "We want to do business in such an environment, not because we like pessimism but because we like the prices it produces."

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 solar stocks Suntech Power (NYSE:STP) and JA Solar may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Just two days ago, for instance, CAPS All-Star boghead tapped Pacific Ethanol as a rather corny opportunity:

The majority of the CAPS community seems to be pessimistic about the short-term and medium-term performance of Ethanol industry. I personally feel like ethanol is a bad solution for green energy. ... I definitely see oil prices going up in the long term, but definitely not before the Fed starts raising interest rates. This leads me to agree with the general Ethanol pessimism.

Following yesterday's nasty 20% plunge, boghead is off to a strong start with that call.

The bearish takeaway?
Always invest with a healthy dose of skepticism. Ethanol fuel stocks may sound like an exciting place to put your money, but without solid evidence of long-term economic feasibility, it would be tough to classify them as prudent investments. As Buffett's right-hand man, Charlie Munger, candidly puts it, "Running cars on corn is about the stupidest thing I ever heard of. Our government is under tremendous political pressure [to support corn ethanol], even though it makes no sense."

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 retire wealthy.

Log in to CAPS today and start participating. It's absolutely free -- and a lot of fun!