5 Stocks in a Tailspin

Individual stocks can surge 10%, 25%, or even higher in a short period of time. And they can fall just as far, just as quickly. Look no further than the 22% shellacking that shares of Barr Pharmaceutical (NYSE: BRL  ) took the week before last, after the company lowered its earnings bar with a reduced outlook for the balance of the year.

Big drops in share price can signal material defects or new risk, but at other times, they're simply pullbacks after a long run-up. Fortunately, we have Motley Fool CAPS, a great resource to help us understand the larger picture behind big price drops.

Is the sky falling?
CAPS contains more than just the crowd's opinions. Its best-performing investors' opinions count more in shaping each company's rating than do the picks of their poorer-performing peers. That way, investors can intelligently use the collective wisdom of more than 105,000 CAPS investors to make better decisions.

To put this approach into practice, we'll screen for stocks that have been slashed by at least 15% in the past month and that have a market cap of greater than $100 million and a beta of less than 3. That'll keep us out of the mud-filled world of gyrating penny stocks.

Here's a sample of stocks our screen returned:

Company

CAPS Rating
(out of 5)

1-Month
Price Change

Rofin-Sinar Technologies (Nasdaq: RSTI  )

*****

(16.8%)

Hecla Mining (NYSE: HL  )

****

(16.4%)

Geron (Nasdaq: GERN  )

***

(19.6%)

iRobot (Nasdaq: IRBT  )

***

(21.6%)

Corus Bankshares (Nasdaq: CORS  )

*

(39.3%)

Return data is calculated as the difference between the closing price on April 11 and the closing price on May 15, per MSN Money's screen. Star ranking from CAPS. Data as of May 15.

Let's delve deeper into recent circumstances and find out why some of these stocks have been beaten so badly.

Rock 'em, sock 'em
After the company raised guidance early in 2008, shares of robot developer and Motley Fool Rule Breakers recommendation iRobot have been steadily falling from their high for the year. But the downward trend really picked up steam at the end of April, when the company reined in its once-optimistic outlook and abruptly announced that CFO Geoffrey Clear would be departing.

Management now anticipates a gloomy second half of the year, largely because of a deteriorating retail environment. In particular, management noted that it's now stuck with a $1.8 million bill that struggling retailer Linens 'n Things was supposed to pay in the first quarter for robots shipped. As such, iRobot feels that its retail partners in general may curtail orders for the back half of the year.

Overall, sales growth isn't a problem for iRobot -- its consumer robotics division, which includes the Roomba and Scooba, saw sales jump 55% in the first quarter of 2008. Products for the military have also been in high demand; sales jumped 35% there, as projects for ground vehicles, including one under development with partner Boeing (NYSE: BA  ) , advance. But consistent operating profits remain elusive for the company, with operating margin yet to find a nice upward trend.  

With a glum retail outlook and plenty of stiff competition for military contracts, there are certainly a few cogs loose in the iRobot engine at this point. But the company's continued strong sales growth has prompted at least a few contrarians to notice its lower share price. CAPS investors have maintained the middle ground for several months now, with 925 out of the 1,048 investors who've rated the company believing it will beat the market in the future.

All together now
Our sole one-star tailspinner this week, Corus Bankshares, hasn't had much love thrown its way in a long time. The Chicago-based bank is reeling from its broad exposure to real estate loans in some of the worst markets in California and Florida. The company's first-quarter earnings release was all about loans gone bad, with management blaming dramatically reduced earnings on a "severe disruption" in the mortgage and credit markets.  

And while things aren't expected to get better for a while, Corus claims to hold a strong capital and liquidity position that will allow it to weather the storm. But Wall Street has heard that line before. CAPS investors still see Corus as a lost cause, with two-thirds of CAPS All-Stars still logging bearish votes on the company.

Whether you believe the reasoning behind a fall in any stock, your own research is more important than collective opinions. CAPS can help you quickly focus your due diligence and even point out potential pitfalls you may not have seen.

Add your take on these or any of the 5,600 stocks that 105,000-plus investors have covered in Motley Fool CAPS. It's totally free to be a part of the community, and the payback is more than worth it.

The Motley Fool Rule Breakers service thinks iRobot has the right stuff to crush the market. To see all the stocks David Gardner and the analyst team have recommended, take a free 30-day trial today.

Fool contributor Dave Mock habitually looks for silver linings in even the darkest of clouds. He owns no shares of companies mentioned here and is the author of The Qualcomm Equation. Rofin-Sinar Technologies is a Motley Fool Hidden Gems selection. Barr Pharmaceuticals is a Stock Advisor recommendation. The Fool's disclosure policy is made of sugar and spice and everything nice.


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