Thursday's Biggest Stock Stars

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 top ratings of four or five stars:

There's a reason I selected those notable gainers, as opposed to other winners making noise on Thursday, like low-rated Qwest Communications (NYSE:Q): 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, 99.7% of the 314 All-Star members who've rated Zhongpin have a bullish opinion of the stock. In March, one of those top Fools, MattMcComb, explained why the Chinese meat processor looked particularly succulent:

Super cheap and operating in a great recession-resistant industry. Exports are slumping in China, but the long-term demographics are strong....an expanding middle class means more people eating meat, and being a profitable producer with a strong balance sheet is an enviable position to be in.

Following yesterday's market-bucking pop, Zhongpin is up an impressive 79% since that call.

The bullish lesson?
Learn to pounce on stocks priced for imperfection. It's virtually impossible to call a stock's "bottom," but if you're confident that the risks are already baked into the price, there's a good chance your investment will turn out well over time. Like Warren Buffett tells it, "Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well."

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

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

While yesterday's drop in five-star stock CapitalSource (NYSE:CSE) may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Last year, for instance, CAPS All-Star moneyrocket warned Fools of Rite Aid's unhealthy situation:

They have too much debt and their valuation is a bit expensive. They barely made enough money to cover their interest payments. This is a company that is dependent on credit lines to continue their operation. In the credit environment we have today, this is just suicidal.

Shares of the drugstore operator are down 41% since that warning. In fact, yesterday's double-digit plunge came after the company posted yet another quarterly loss and increased its projected full-year loss on continued economic weakness.

The bearish takeaway?
Always identify a stock's risk exposures before they come back to haunt you. One of the most common mistakes we make as investors is underestimating how sensitive a business model can be to specific economic and industry-related variables. Unless you can reasonably conclude that a company looks cheap even under the worst of scenarios, you're setting yourself up for heartache if (and when) that worst case arrives.

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!