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 AMD (NYSE:AMD). Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 145,000 CAPS Fools considers its high-star stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 98.2% of the 795 members who've rated ICO have a bullish opinion of the stock. A year ago last spring, one of those Fools, reddingrunner, explained why the custom polymer and resin specialist looked too cheap to pass up:

Global specialty company with a big overseas market and a P/E of about 9.5. Unless you expect them to grow at less than 10% a year, this is a screaming buy. Buying on the dips is especially promising when dealing with highly volatile stocks.

Consistent with that call, shares of ICO soared over 45% yesterday after polymer peer A. Schulman agreed to acquire the company for $191.4 million to substantially expand its global reach.

The bullish lesson?
Learn to think like a business owner, not a stock trader. All sorts of noise can swing a stock violently in the short-term, but true investors focus on the factors that really count over time. As CAPS' reddingrunner understands, by buying into small, obscure stocks with big global potential, you give yourself plenty of "upside" opportunities -- including getting bought by one of the big boys -- to earn an outsized return.

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 highly rated US Bancorp (NYSE:USB) may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Just two weeks ago, for instance, CAPS All-Star wvwheeling offered a pair of reasons to change out of Abercrombie:

First, they seem a bit overvalued at 20x forward earnings. All economists seem to believe the U.S. will have another jobless recovery, which might mean these estimates are high. ... Second, in the long run, it is very difficult to maintain profits on selling overpriced merchandise on brand alone. Certainly it can be done, but it is not easy.

In line with that warning, shares of the teen apparel retailer plunged yesterday after posting a November same-store sales decrease of 17% -- well below analyst expectations.

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 competitive position going forward. As Warren Buffett reminds us, "The investor of today does not profit from yesterday's growth."

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!