Tuesday's Biggest Stock Stars

Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight a few of Tuesday's biggest winners among the stocks with top ratings of four or five stars.

Without further ado:

There's a reason why I selected those notable gainers as opposed to other winners making noise on Tuesday, like low-rated homebuilders Hovnanian and Meritage. Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 130,000 CAPS Fools considers its "high-star" stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 94% of the 682 All-Star members who've rated Under Armour have a bullish opinion of the stock. Last month, one of those Fools, PsychoDr, explained why the apparel retailer seemed armed to outperform:

Moving into athletic shoes to take on Nike. Great clothes, huge profit margin, and all I see on the kids in the leagues that my children participate in is [Under Armour] clothes. None of these kids are wearing Nike or Adidas anymore. You know brand loyalty, hit the young ones and let them buy your stuff for life.

Shares of Under Armour are already up nearly 50% since that call. In fact, yesterday's pop came after the company posted first-quarter profit growth of 38%, fueled mainly by strong sales of its new running shoe -- consistent with PsychoDr's observations.

The bullish lesson?
It pays to believe your eyes. As CAPS' PsychoDr demonstrates, finding great stocks often begins with simple observation, a little intuition, and a whole lot of Foolish common sense. As long as you conduct plenty of due diligence before buying, pulling investment leads from your own everyday surroundings can be a profitable habit to master.

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

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

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

Did CAPS call the fall?
Two days ago, for instance, CAPS All-Star Bubba150 summed up the recent restructuring plan laid out by GM:

Looks to me like the US Government and the unions will end up owning this. Bond holders will get next to nothing and the common will be wiped out. I am betting this will go to 0!

Consistent with that call, shares of GM dropped yesterday as investors started to realize that the massive restructuring effort -- that includes plans to cut 21,000 factory jobs, phase out the Pontiac brand, and an offer to swap debt for common stock -- was simply another step toward bankruptcy.

The bearish takeaway?
Never bet on a stock based purely on a bailout possibility. As CAPS' Bubba150 understands, assistance from the government doesn't necessarily mean that current shareholders stand to benefit. Unless you're truly able to discount the massive dilution effects and risk exposures that still remain, buying into "zombie" institutions is strictly speculation.

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!