Monday's Hottest Stocks

Hey there, Fools. I've summoned our Motley Fool CAPS community once again to highlight a few of Monday'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 Monday, like low-rated Amazon (Nasdaq: AMZN). Stocks go up all the time, but unless you were able to predict the pop, what does it matter?  

Our community of more than 150,000 CAPS Fools considers its high-star stocks the most likely to outperform the market.

Written in the (five) stars?
For example, 98% of the 414 All-Star members who've rated USEC have a bullish opinion of the stock. Two months ago, one of those top Fools, mrindependent, explained why the stock seemed like an explosive opportunity:

This company has a reasonably decent durable competitive advantage, but it is selling for 40% of book value. The company is still reeling after the government denied its loan guarantee application in July, 2009. Uranium prices and demand volumes aren't helping. ... I expect this stock to be volatile. Any good news will lead to a price spike.

Consistent with that call, shares of the enriched-uranium provider surged over 20% yesterday after its fourth-quarter profit nearly doubled on the settlement of an international trade dispute.

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 all the risks you're taking on. If an investment's potential payoff seems generous compared with the chance of loss -- as mrindependent surmised with USEC -- 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 Monday's biggest decliners with one- or two-star ratings:  

While yesterday's drop in highly rated Lloyds Banking Group (NYSE: LYG) may have caught our community off guard, low-ranked stocks are fully expected to fall hard.

Did CAPS call the fall?
In late January, for instance, DarthMaul09 had a tough time accepting World Acceptance's price strength:

This stock has enjoyed a nice price rise since Oct 2009, but the environment that the government has created has made investors nervous. Profit taking before some new government surprise is likely to happen. The only question is whether this stock will fall faster than the S&P 500.

Following yesterday's market-bucking loss, DarthMaul09 is off to a strong start with that bearish call.

The bearish takeaway?
Don't be swayed by Wall Street's short-termism. As long as a company's fundamentals continue to frighten you, it's best to stick to your long-term thesis and not become too affected by daily swings of sentiment. As value legend Benjamin Graham famously said, "In the short run, the market is a voting machine, but in the long run, it is a weighing machine."

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 retire wealthy.

Log in to CAPS today and start participating. It's absolutely free -- and a lot of fun!