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


Yesterday's Gain

Lexicon Pharmaceuticals (NASDAQ:LXRX)


American Capital


Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B)


Western Refining


US Bancorp (NYSE:USB)


There's a reason I selected those notable gainers, as opposed to other winners making noise on Wednesday, like low-rated Rambus (NASDAQ:RMBS). 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, 91.4% of the 268 members who've rated Lexicon have a bullish opinion of the stock. Three months ago, one of those Fools, DavidBear, brought the baby biotech to our community's attention: "Company has a number of irons in the fire. Recent diabetes phase I result looks promising (although short in length), the concept behind it is sound."

Consistent with that call, shares of Lexicon bucked yesterday's downtrend after its diabetes drug candidate LX4211 was shown to significantly improve blood glucose levels in mid-stage trial.

The bullish lesson?
There's just no substitute for knowing a company cold. By carefully breaking down the risks and rewards of a given business' pipeline, you'll be well ahead of most investors in estimating what the stock is worth. As CAPS member DavidBear understands, Wall Street often overlooks the potential lying within a company's portfolio, which can add some attractive "optionality" to the valuation.

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

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


Yesterday's Loss

China Automotive Systems (NASDAQ:CAAS)




Office Depot


Las Vegas Sands


First Solar (NASDAQ:FSLR)


While yesterday's plunge in highly rated miner Coeur d'Alene may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Just last month, for instance, CAPS member TheChozen1 strongly advised Fools to steer clear of China Automotive:

I wish I didn't sell so early, but in 6 months this stock has grown over 600 pct... I think that's a little too much. Plus there is tons of insider selling. Not only are they selling, but they are trying to sell as much as possible without making it look like they are desperate.

Including yesterday's slide, shares of the Chinese auto parts maker are trailing the market by nine points since that call.

The bearish takeaway?
Always keep an eye on the insiders. It's true that insiders may sell for reasons that have nothing to do with their outlook on the business, but when the stock seems severely overpriced, heavy insider selling should often cement the bear case. As TheChozen1 understands, when the people closest to your business are racing to cash out, it's probably best to do the same.

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!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Berkshire is a Motley Fool Inside Value and Stock Advisor pick and the Fool owns some. First Solar is a Rule Breakers pick. The Fool's disclosure policy is always the big winner.