Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight yesterday's biggest gainers among the stocks with a top rating of five stars.

Without further ado:


Yesterday's Gain



Exactech (NASDAQ:EXAC)


Oppenheimer Holdings






The reason I selected the largest five-star gainers, as opposed to other big-name winners making noise on Monday -- such as LG Phillips (NYSE:LPL) and Ballard Power -- is simple. Stocks go up all the time, but unless you were able predict the pop, what does it matter?

Our community of more than 73,000 Fools in CAPS considers its five-star stocks the most likely to outperform the market.

Written in the (five) stars?
Based in Gainesville, Fla., Exactech is a micro-cap company our community has favored for quite a while. Of the 50 CAPS players who've rated the provider of orthopedic implant products, an overwhelming 49 of them are bulls.

This outperform pitch -- pulled from Exactech's CAPS page -- gives us a glimpse into our community's thinking:

Exactech is an orthopedic implant manufacturer that is well positioned to take advantage of such growth [in knee operations]. Granted there are big players in the market such as Biomet, Stryker and Johnson & Johnson (NYSE:JNJ), but with 41 percent insider ownership and an increasingly strong sales force and product pipeline Exactech is well positioned to compete on the largest stage.

Since StockBoxChandler made that call just a short month ago, Exactech is up a sweet 38%. In fact, ever since management reported its third-quarter results at the end of last month -- where revenue and net income grew of 23% and 35%, respectively -- the stock has been on fire.

The bullish takeaway? Stocks that play on huge demographic trends are definitely a good starting point for research. But make sure the companies you're looking into actually have the pipeline, financials, and -- better yet -- insider ownership to really confirm those forecasted tailwinds. When all those potent factors come together with a stock, chances are you're sitting on a winner.         

A little love for the losers ...
Of course, winning isn't everything in the stock market.

Here are yesterday's biggest one-star decliners:   


Yesterday's Loss

Fremont General


Midway Games


China Architectural Engineering (AMEX:RCH)


Herbalife (NYSE:HLF)


McGrath Rentcorp


One-star stocks inspire the least confidence from our CAPS players. So while Monday's drop in CNOOC (NYSE:CEO) may have caught some investors off guard, our community fully expects one-star stocks to fall -- and fall hard.

Did CAPS call the fall?
Take, for instance, this underperform pitch on China Architectural Engineering, which CAPS All-Star dinasourneil made in early October.

It is by far the worst example of the China bubble. China Architectural Engineering IPO'd at $3 on Friday 9/28/07 ... by 10/4/07 the stock closed at $20.51 for a total market value of about $1 billion. Sales for 2006 were $64 million. [N]et income was $6.1 million, for an EPS of $0.14, giving this stock [a P/E] of 146. ... If you're buying these stocks, please be aware what you are doing. Momentum trading is just that, trading. It is not investing, and these values are NOT supported even remotely by any estimation within reason of future cash-flows for these companies.

China Architectural is already down a gut-wrenching 55% since that call was made.

The bearish lesson? Buying stocks based strictly on price momentum is a dangerous game. While stocks can blast off based purely on investor enthusiasm and speculation in the short run, all businesses level off on their intrinsic values over the long term. You might be able to find a "greater sucker" to buy your overhyped shares once -- or maybe even twice -- but it's only a matter of time before you end up holding the bag. Don't be that small-f fool.     

The final Foolish move
Investors often focus strictly on stock price movements (or the results) without realizing that developing a proper stock-picking process counts most.

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 the market's 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! 

Johnson & Johnson is a Motley Fool Income Investor selection.

Fool contributor Brian D. Pacampara owns no position in any of the companies mentioned. The Fool's disclosure policy is always the big winner.