Thursday's Biggest Winners and Losers

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 a top rating of five stars.

Without further ado:

There's a reason I selected notable five-star gainers, as opposed to other big-name winners making noise on Thursday: Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 115,000 CAPS Fools considers its five-star stocks the most likely to outperform the market. And so far, CAPS has indeed proved its market-beating prowess: Since its inception in 2006, five-star stocks are beating the market by 12 points, annualized.

Written in the (five) stars?
For example, out of the 1,265 CAPS All-Stars who've rated Chinese online travel agent Ctrip.com, an overwhelming 97% have a bullish opinion.

Less than two months ago, CAPS All-Star tuffsledding even pointed out Ctrip's sliding stock price to our community:

The Chinese will not stop traveling after the Olympics! There is a rapidly growing middle class in China and they want to travel. CTRP continues to grow rapidly, but there is so much more growth to come it is beyond imagination. The current pullback brings the valuation back into an attractive level. This is a long-term winner.

Consistent with that call, shares of Ctrip surged yesterday after posting second-quarter earnings and revenue growth ahead of Wall Street's expectations.

The bullish lesson?
Whenever the shares of a company you like take a tumble, always try to figure out why. If the reasons for the drop, in your own opinion, are only temporary, then you might have found a good opportunity to buy quality on the cheap. As Warren Buffett says, "Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised."

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

Here are five of Thursday's biggest one-star decliners:   

One-star stocks inspire the least confidence from our CAPS members, and for pretty good reason: Since CAPS started, one-star stocks have dropped by an average of 11.4%, annualized.

Did CAPS call the fall?
Just last month, for instance, CAPS All-Star gtrinvestor repeated his bearish call on VeraSun Energy:

In line with that bear call, shares of the ethanol producer plunged yesterday after the company announced a $750 million mixed shelf offering, which it will probably use to pay down debt.

The bearish takeaway?
Don't believe the hype. Alternative-energy plays such as ethanol fuel may sound exciting, but with heaps of debt, continuous dilution, and without solid evidence of long-term economic feasibility, it would be tough to classify them as prudent investments. As Charlie Munger once candidly put 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, above all else, 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!