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 top ratings of four or five stars.

Without further ado:

There's a reason I selected those notable gainers as opposed to other winners making noise on Wednesday, like one-star target Centex (NYSE:CTX). 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, 98% of the 643 All-Star members who've rated Tata Motors have a bullish opinion of the stock. In January, one of those Fools, dollarpuppy, explained why the Indian automaker looked like a good bet to outperform: "India growth and reasonable debt offset risk of Nano, and if it takes off, even better. Nice yield looks sustainable."

Consistent with that call, shares of Tata have more than doubled since it finally announced the launch of its Nano, the world's cheapest car, just over a month ago.

The bullish lesson?
In investing, it's far better to keep your head down rather than up. As long as you make a conscious effort to limit your risk, like dollarpuppy demonstrates, market-trouncing returns usually just take care of themselves. As Warren Buffett once wrote, "Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results."

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

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

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

Did CAPS call the fall?
Last week, for instance, CAPS member wolfhounds urged our community to stop putting their trust in SunTrust shares:

As I wrote in my post last summer, my analysis of [SunTrust's] balance sheet and notes to financial statements indicated that potential write offs from all classes of assets (including those not required by FASB) were about $30B. [SunTrust] management had stated the number was $6B and the stock recovered to the mid 30's along with other banks. I have no doubt when the stress test list is announced [SunTrust] will not be a stock any Fool wants to own.

After yesterday's drop, shares of SunTrust lagged the market by 14 points since that call.

The bearish takeaway?
Never confuse a recovering price for an improving business. As long as a company's underlying financials continue to deteriorate, it's only a matter of time before the stock price starts to reflect it. By doing your own homework and ignoring Mr. Market's (or even management's) current opinion, you give yourself a better chance of coming to a more realistic view of a company's risk/reward profile.

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!