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, shares of clothing retailer Quiksilver fell 17% when it followed a disappointing fiscal second quarter by announcing that fiscal third-quarter profits fell more by more than half on weak sales.
Big drops in share price can sometimes signal material defects or new risks. But at other times, they're simply pullbacks along with the larger pessimism facing the market today. 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 members' 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 140,000 CAPS members to make better decisions.
We'll use CAPS' handy stock screening tool to quickly zero in on companies that have been slashed by at least 15% in the last four weeks, and which have a market cap greater than $100 million and a beta of less than 3. If you want to run this screen for yourself, please do -- just keep in mind that the results will update with the market.
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Company
|
CAPS Rating
(out of 5)
|
4-Week
Price Change
|
|
Osiris Therapeutics (Nasdaq: OSIR )
|
**
|
(37.1%)
|
|
UltraShort Real Estate ProShares (NYSE: SRS )
|
**
|
(16.3%)
|
|
Cabela's (NYSE: CAB )
|
***
|
(20.1%)
|
Source: Motley Fool CAPS. Price return Aug. 21 through Sept. 15.
Osiris Therapeutics
Overall, CAPS members have a pretty bearish outlook for Osiris Therapeutics' stem cell therapies, one of which recently failed two late-stage trials. Its Prochymal drug, being developed in partnership with Genzyme, showed no statistical benefit over a placebo in its phase 3 trials for the treatment of graft versus host disease. Shares fell to lifetime lows, reflecting the extreme volatility that investors in others like Geron (Nasdaq: GERN ) and StemCells (Nasdaq: STEM ) have experienced in the past. The news, which is one of several setbacks the drug has had this year, came the same day the company's CFO resigned "to pursue new professional opportunities." At this point, just under 70% of the 210 CAPS members rating Osiris Therapeutics remain bullish on its chances to beat the market.
UltraShort Real Estate ProShares
UltraShort Real Estate, an inverse leveraged exchange-traded fund, seeks to return twice the opposite of the daily performance of the Dow Jones US Real Estate Index. Leveraged ETFs can fulfill their purpose for short-term investors who fully understand them, but they've come under fire lately from regulators as they've become more popular. The Financial Industry Regulatory Authority, or FINRA, is attempting to increase awareness of the risks involved, and a lawsuit was recently filed against UltraShort Real Estate seeking class action status. Leveraged ETFs across the industry are facing increasing margin requirements and some brokers like Morgan Stanley (NYSE: MS ) and Citigroup's joint venture Morgan Stanley Smith Barney have even ceased selling the funds for the moment. Despite the risks though, 85% of the 1,258 CAPS members rating the ETF expect it to outperform the broader market.
Cabela's
Retail has been a four-letter word lately, but sporting goods retailer Cabela's reported growth in earnings and revenue in the second quarter, helped by growth in same-store sales and increased demand for hunting equipment. However, it recently reported that its credit card portfolio had increasing charge-offs in July, a thorny issue that discounter Target (NYSE: TGT ) has faced in the past. The company is still looking for growing revenue and same-store sales in 2009 over last year, but expects earnings to be flat. The mixed outlook prompted a JPMorgan analyst to recently downgrade the stock projecting weakness in guns, ammo, and other discretionary items. A total of 90% of the 724 CAPS members rating Cabela's see it topping the S&P.
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 5,300 stocks that 140,000-plus members 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.
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