Tuesday's Biggest Stock Stars

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 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 Tuesday, like low-rated SunTrust Banks (NYSE:STI). 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, 92% of the 1,095 members who've rated Legg Mason have a bullish opinion of the stock. In November, one of those Fools, morgan628, explained why the asset manager looked like an asset worth owning:

A healthy balance sheet, recent quarterly results that were not as bad as they could have been, and a well conceived cost cutting plan should give the firm good financial flexibility in the future. I think [Legg Mason] looks to be a good turn around prospect.

With the help of yesterday's double-digit pop, Legg Mason is up 56% since that call.

The bullish lesson?
Train yourself to be greedy when others are fearful. As long as you've done your homework and are absolutely convinced of a company's long-term earnings power, a bit of angst from Mr. Market can create perfect buying opportunities. Like Warren Buffett says, "Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised."

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

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

Did CAPS call the fall?
In February, for instance, CAPS member Option1307 helped spread the bearish news on Gannett:

I actually like their signature newspaper (USA Today), and read it frequently; however, the age of the newspaper is rapidly declining and likely doomed forever. Never try and catch a falling knife, especially in a horrible industry that fell off a cliff 5 years ago.

Consistent with that warning, shares of several newspaper stocks sank yesterday as investors caught wind of an industry report which showed that first-quarter sales of print ads fell nearly 30% industrywide.

The bearish takeaway?
Always beware of "buggy whips" disguised as bargains. As Buffett put it during this year's Berkshire Hathaway annual meeting, "For most newspapers in the United States, we would not buy them at any price. ... They have the possibility of nearly unending losses. ... I do not see anything on the horizon that sees that erosion coming to an end."

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!