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 a top rating 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 Thursday, such as low-rated Harley-Davidson: 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, 96% of the 702 All-Star members who've rated Mosaic have a bullish opinion of the stock. In April, one of those leading Fools, TSIF, explained why the phosphate and potash producer looked too potent to pass up:

Commodities are starting up, farmers have access to credit, people need to eat, Mosaic's P/E is still sub 6, with 30% margins and over 50% ROE. Cash on hand exceeds debt by a hefty margin. While 52 week high is not a good indicator in a recession and [fertilizers] probably overshot their mark last year, Mosaic is still at only 25% of [its] 52 week high.

Consistent with that call, shares of Mosaic surged yesterday on a report that Brazilian mining giant Vale (NYSE:VALE) is contemplating a $25 billion bid for the company.

The bullish lesson?
All sorts of things can depress a stock's price in the short run, but the true business owner focuses on the factors that really count over time. By buying quality companies in timely industries, and at bargain prices, you give yourself plenty of upside opportunities -- including being bought out by the big boys -- to earn an outsized return. As Warren Buffett recommends, "Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."

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

While yesterday's drop in highly rated Nokia may have caught our community off-guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
Just last week, for instance, TSIF also assisted Fools with the CIT situation:

Jumping in on CIT Group here is a bit risky. ... CIT Group has been waiting (im)patiently on the FDIC to decide if they are eligible for some bailout. (Federal Backing for their bonds). The long wait and speculation is that they may be turned down because they are a "bad credit risk". ... My red thumb is betting that the FDIC lets them sink.

In line with that warning, shares of the embattled business lender plummeted by 75% yesterday, when bankruptcy fears grew after the company was, indeed, denied a federal bailout.

The bearish takeaway?
Never bet on a business based purely on a bailout possibility. Huge gains might be possible if your stock does get saved, but as CAPS' TSIF understands, the risk of losing your entire investment is just too high to be prudent. As Buffett reminds us: "Sound investing can make you very wealthy if you're not in too big of a hurry. And it never makes you poor, which is even better."

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!