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 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 Wednesday, like low-rated STEC (NASDAQ:STEC). Stocks go up all the time, but unless you were able to predict the pop, what does it matter?

Our community of more than 135,000 CAPS Fools considers its "high-star" stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 94% of the 758 members who've rated Oshkosh have a bullish opinion of the stock. In late April, one of those Fools, GimliJan, explained why the specialty vehicle maker looked all ready to roll:

[Oshkosh] is a large vehicle manufacturer of specialty vehicles, like fire trucks, ambulances, military vehicles, snow plows, ice scrapers, etc. I bought to get exposure to military vehicle market and feel the specialty vehicle market will be a better investment than the consumer auto industry segment. Governments still have to budget and buy vehicles for essential services and the military still needs vehicles.

Shares of Oshkosh are up more than 60% since that call. In fact, yesterday's surge came after the company scored a $1 billion contract with the Pentagon to build MRAP armored vehicles for ground forces in Afghanistan -- just as GimliJan had predicted.

The bullish lesson?
Pay attention to small caps that make a habit of landing big deals. As CAPS' GimliJan understands, just a couple of major contract wins can have a huge impact on a small business, so focus on the market leaders with massive trends working in their favor. If those tailwinds are indeed strong enough, blockbuster deals will probably keep blowing in that company's direction.

And now for the losers ...
Of course, winning isn't everything in the stock market. Here are five of Wednesday's biggest decliners with a one- or two-star rating:

While yesterday's plunge in five-star stock Immersion may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Last month, for instance, CAPS All-Star TMFGalagan shared a common-sense call on AIG's common stock: "Re-upping here, as I still don't see the company recovering enough in its orderly liquidation to leave anything for shareholders."

Not surprisingly, shares of the embattled insurance giant are down 42% since that warning. In fact, AIG plunged more than 20% yesterday after shareholders approved a 1-for-20 reverse split to help prop up the price and protect its listing on the NYSE.

The bearish takeaway?
Never bet on a stock simply because it was "bailed out." As CAPS' TMFGalagan understands, assistance from the government doesn't necessarily mean that common shareholders stand to benefit. Unless you're truly able to discount the massive dilution effects and operating risks that still remain, buying into "zombie" institutions might end with horrifying returns.

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!