We at The Fool usually don't pay attention to day-to-day price gyrations. We prefer to track each business's intrinsic value. By its very nature, that figure changes a lot less frequently than Mr. Market's wild swings would have you believe.       

But some price moves are just so big that investors should at least take notice -- especially when we Fools could have seen them coming.  

The big winners
With that in mind, I've summoned our Motley Fool CAPS community to highlight yesterday's biggest gainers among the stocks with CAPS' top rating of five stars:


Yesterday's % Gain



Telefonica (NYSE:TEF)


China Petroleum & Chemical (NYSE:SNP)


Sterlite Industries India (NYSE:SLT)


NetEase.com (NASDAQ:NTES)


The reason I selected the biggest five-star gainers, as opposed to some of the largest overall winners, is simple. Stocks go up all the time, but unless you were able to predict the pop, what does it matter?    

Did CAPS predict the pop?
Our 65,000-member CAPS community considers five-star stocks the most likely to outperform the market. By reverse-engineering some of the arguments made for these picks, our odds of finding the next big winner could improve.  

For example, China Petroleum & Chemical, the Beijing-based oil and gas producer, has more than 300 CAPS All-Stars rating its stock "outperform," compared to a paltry four bears.

This outperform pitch -- written back in May -- lists some of the numbers that captivated our community:  

The P/E and P/B are higher than I'd like, but this company has way outperformed the S&P since 2002. [Dividend yield] is 2.30%. Assets to Liability ratio is 1.7, which is a decent cushion. Growth for past 5 years 27.6%.

A little overpriced but a solid company.

When CAPS All-Star amteague777 made that call, SNP had already climbed 50% from the previous year. Nevertheless, the stock has still managed to return another 52% since this pitch was written.

The bullish takeaway? Don't be afraid to pay a premium -- within reason, of course -- for a superior business. If the company generates tons of cash, has a rock-solid balance sheet, and most importantly, is growing its intrinsic value at a reasonable pace, what may seem like an expensive price on the surface might really be a tremendous bargain in the long run. 

As the great Warren Buffett says, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

Now for the losers
Of course, winning isn't everything in the stock market. Stocks go down, too -- often very, very quickly. Here are yesterday's biggest one-star decliners:   


Yesterday's % Loss

Synutra International


China Shenghuo Pharmaceutical Holdings


Ruby Tuesday (NYSE:RT)


China Finance Online




Did CAPS call the fall?
One-star stocks inspire the least confidence from our CAPS community. By investigating a few of the bearish arguments made for these losers, we'll have a better chance of averting portfolio disaster in the future.   

For instance, take this underperform pitch from UTStarcom's CAPS page:

I wouldn't touch this stock with gift money. I used to own it before delayed filing after delayed filing, a collapse in China's PAS demand, and a complete repositioning of the company's product portfolio and operations. All of this and the company is playing in a market with much lower profit margins and an industry with greater competitive rivalry. Good luck UTStarcom.

The wireless communications company is down 46% since CAPS All-Star foolsfool11 penned that pitch last March.

The bearish lesson? Never be afraid to change your mind. One of the worst things we can do as investors is to be dishonest with ourselves when we've made a mistake. When you realize you've messed up, don't take it personally! Making the right move matters most.

The final Foolish move
Investors often focus strictly on stock price movements (or their results), 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. It's absolutely free -- and a lot of fun!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.