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:


Yesterday's % Gain

Exelixis (NASDAQ:EXEL)


Baker Hughes




BJ Services (NYSE:BJS)




There's a reason I selected those notable gainers as opposed to other winners making noise on Tuesday, like one-star biotech Novavax: 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, 96.5% of the 687 All-Star members who've rated longtime Motley Fool Rule Breakers recommendation Exelixis have a bullish opinion of the stock. Late last year, one of those top Fools, MattH42004, explained why the biotech looked too potent to pass up:

A speculative play, but one with a lot of potential upside. This company has one of the best potential drug lines in the industry, and it seems apparent that they will receive all the funding they need to continue R&D, especially after their recent cost cutting.

Following yesterday's market-bucking pop, shares of Exelixis are up 97% since that outperform call.

The bullish lesson?
The most important job you have as an investor is to quantify a stock's upside and downside. At the very least, you should always make sure you're being compensated appropriately for the risks you're taking on. If a stock's potential payoff seems generous compared to the chance of loss -- as MattH42004 surmised with Exelixis -- it's probably best to take Mr. Market up on his offer.

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:   


Yesterday's % Loss

Builders FirstSource (NASDAQ:BLDR)






Citigroup (NYSE:C)




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

Did CAPS call the fall?
In July, for instance, CAPS All-Star TSIF built a solid bear case against Builders FirstSource. Here's an excerpt: 

Revenue is less than half it was two years ago and continues dropping sharply quarter to quarter. Typically when your debt is 3X your cash on hand, the cash is needed to help secure the covenants when inventory is not sufficient. Builders has been working off inventory and the cash it held shows that it planned well for the recession, but the recession appears to be outlasting it.

Consistent with that warning, shares of the building products supplier plummeted 35% yesterday after two of its largest investors proposed a plan to recapitalize the company, which could ultimately prove dilutive for common shareholders.

The bearish takeaway?
Always identify a stock's dangers before they come back to haunt you. One of the most common mistakes we make as investors is using fuzzy, surface-level arguments to defend a stock, while completely ignoring its actual risk exposures. As Warren Buffett simply says, "Risk comes from not knowing what you're doing."

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! 

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Exelixis is a Motley Fool Rule Breakers recommendation. The Fool owns shares of Exelixis. The Fool's disclosure policy is always the big winner.