Wednesday's Biggest Stock Stars

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:

There's a reason I selected those notable gainers as opposed to other winners making noise on Wednesday, like low-rated Ford (NYSE:F): Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 140,000 CAPS Fools considers its high-star stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 98.5% of the 463 All-Star members who've rated Motley Fool Rule Breakers recommendation Focus Media have a bullish opinion of the stock. In March, one of those top Fools, Trimalerus, explained why the advertising network operator was worth focusing on: "This stock has taken a beating recently but it's well positioned to make a comeback, once people come to their senses. Plus flat-panel displays are very competitive vs. traditional billboards."

After yesterday's market-bucking pop, Focus Media is up an impressive 94% since that call.

The bullish lesson?
When an attractive business takes a beating, always try to figure out why. If Mr. Market's punishment seems to make no sense, given the company's long-term demand picture, it might be the perfect time to jump in. As Warren Buffett recommends, "Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results."

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:   

While yesterday's drop in highly rated E*TRADE Financial (NASDAQ:ETFC) may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Late last year, for instance, CAPS All-Star epmccart wrote why US Airways would probably stay grounded:

Besides the laundry list for not investing in airlines at all (umm, let's see: oil costs, less spending money in a recession, huge overhead costs, terrorism fears, etc...), the big airlines ... have been dragging for years. And now they have fresh competition even WITHIN the industry, like [JetBlue] and [Southwest], to deal with -- companies that are cheaper, friendlier, younger and more agile.

Shares of the struggling airline are down 25% since that warning. In fact, yesterday's double-digit plunge came after the company, in a move that would dilute current shareholders, announced the sale of 26.3 million shares to Citigroup under its shelf registration statement, with an option on another 3.95 million.

The bearish takeaway?
Learn to protect your portfolio from airsickness. Unless you're completely confident that a given airline can indeed sustain superior returns on capital -- be it through differentiation or a low-cost structure -- the industry's cutthroat nature makes it difficult to earn a decent long-term buck. In Buffett's words, "You've got huge fixed costs, you've got strong labor unions, and you've got commodity pricing. That is not a great recipe for success."

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 become a more Foolish investor.

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