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. For example, Sun Microsystems (NASDAQ:JAVA) jolted investors by posting a surprise fiscal-third-quarter loss last month -- and its shares tumbled nearly 23% in a single day as payback.

Big drops in share price can sometimes signal material defects or new risks. 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' votes 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.

We'll use CAPS' handy stock screening tool to quickly zero in on companies whose stock prices have dropped by at least 20% in the last four weeks, and that have a market cap 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 CAPS screen returned:

Return data is calculated as the difference between the closing price on May 6 and the closing price on June 3, per Yahoo! Finance. Star rankings from CAPS.

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

Banking on a bottom
There's just no love for the major banks that milked the subprime gravy train past its expiration date -- make that "foreclosure date" -- then left investors holding the bag. One of those banks makes our list this week. Stock in Wachovia continues to spin downward as its balance sheet bleeds, including a recent $2 billion asset writedown.

As Wachovia aims to raise another $7 billion in new capital following its ill-timed purchase of Golden West Financial two years ago, it has also cut its dividend. But Wachovia's problems come from more than bad mortgages -- at the end of the first quarter, it had $23.9 billion in outstanding construction loans, with almost half of those exposed to the troubled housing sector.

And while the various initiatives established by CEO Ken Thompson seem the bank's only recourse to avoid bankruptcy, they've nonetheless earned Thompson membership in the "I used to be a big-bank CEO" club. He's one of the latest executive casualties in the financial industry, joining other top executives from Merrill Lynch (NYSE:MER), Citigroup (NYSE:C), and Washington Mutual (NYSE:WM).

All the same, CAPS shows that a large herd of bulls still see the potential for a turnaround at Wachovia. With 1,174 of the 1,573 investors who've rated the company believing that it'll beat the market going forward, Wachovia maintains its two-star ranking. On the other hand, a higher portion of All-Stars remain bearish on the bank.

Flying even lower
Surprisingly, there may be a sector even more loathed than banking right now: airlines. After months of exploring a consolidation with US Airways, UAL's United Airlines decided to call off the process for now. But with oil north of $120 a barrel, airlines will be squeezed to hike prices or implement major cutbacks and layoffs to survive.

While US Airways' pilots' union strongly opposed the merger and was happy to see the UAL deal scuttled, the market isn't so thrilled. Many investors see no way to avoid further pain, beyond charging consumers more or nationalizing the airlines. As such, US Airways is only one of many one-star airline stocks in CAPS, with more than 80% of All-Star players who've rated the company believing it will underperform the market.

Ultimately, whether or not you believe a fall in any stock is warranted, 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 5,700 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.