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 a top rating 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 Thursday, like one-star financial Capital One (NYSE:COF). 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, 99% of the 920 All-Star members who've rated Dawson Geophysical have a bullish opinion of the stock. In February, one of those Fools, JakilaTheHun, explained why the oilfield services expert seemed like a natural selection:

Could it still have some more downside? Most definitely as I think the market might be underestimating oversupply issues in the natural gas market ... All the same, they have low leverage, seemingly good management...and they have still been producing positive cash flows thus far. ... Despite the uncertainty in the oil & gas markets, I think this is a good long-term stock to own.

Shares of Dawson are already up 51% since that call. In fact, yesterday's surge came after the company's quarterly profits fell 26% and still managed to blow out expectations.

The bullish lesson?
Embrace the opportunities that uncertain situations provide. Many investors mistakenly believe that they can relax, wait on the sidelines, and simply jump back in when all of a company's troubles are resolved. But as Warren Buffett famously said, "The future is never clear, and you pay a very high price in the stock market for a cheery consensus. Uncertainty is actually the friend of the buyer of long-term values."

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

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

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

Did CAPS call the fall?
Earlier this week, for instance, CAPS member Northville wrote that Hot Topic shares were too hot to handle:

The numbers look good, but the truth is that this company is a fad waiting to fall out of grace. I mean come on, a P/E of 25 for a specialty retailer in this environment, trading at toward the top of its 52 week range. This company is going to fall....hard.

Consistent with that call, shares of the teen apparel retailer plunged yesterday after its April same-store sales grew less than half of what Wall Street expected.

The bearish takeaway?
Implicit in a stock's price are very specific growth and risk assumptions. Therefore, it's your job as an investor to assess whether those assumptions are reasonable, given the company's business model and outlook. As Buffett reminds us, "Investors making purchases in an overheated [stock] need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid."

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!