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 Delta Petroleum (Nasdaq: DPTR ) contracted nearly 45% on Monday when it announced weak test results from its Gray Well in the Columbia River basin.
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. 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 past 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.
|
Company
|
CAPS Rating
(out of 5)
|
4-Week
Price Change
|
|
Novavax (Nasdaq: NVAX )
|
*
|
(19.2%)
|
|
STEC (Nasdaq: STEC )
|
**
|
(22.7%)
|
|
Moody's (NYSE: MCO )
|
**
|
(18.9%)
|
Source: Motley Fool CAPS. Price return Aug. 28 through Sept. 12.
Novavax
Shares of biotechs like Novavax and BioCryst Pharmaceuticals (Nasdaq: BCRX ) have been multiplying in value this year as fears of swine flu and other pandemics have escalated. But shares recently took a hit when the company announced a secondary share offering of $10 million. While many investors had been anticipating more immediate results, Novavax doesn't expect approval in the U.S. until 2012 for its flu vaccine, and is still pushing for deals in other countries.
Despite the potential demand for flu vaccines, many CAPS members view Novavax as a highly speculative play and are largely bearish on the stock, with just 57% of the 357 members rating the company expecting it to outperform the market.
STEC
Even though many CAPS members believe that STEC is a solid company, many are now taking a step back, now that shares have generated huge gains over the past year. Before its recent plunge, investors were looking at a 10-bagger in less than a year!
In its recent quarter, STEC posted 375% year-over-year growth in sales of its ZeusIOPS enterprise solid-state drives, in a market that's expected to see big growth in the years ahead. Competition in the SSD market is growing, though, and prices for the NAND flash chips that STEC uses to make its drives have risen rapidly. Although this stage of the cycle could give a boost to flash memory companies like SanDisk (Nasdaq: SNDK ) , it could put the hard squeeze on STEC.
Even with the dramatic run and future risks, though, 83% of the 524 CAPS members rating STEC see the stock outperforming the S&P going forward.
Moody's
Moody's stock has seen its share of volatility in the past year. Credit-ratings agencies have taken a lot of heat for issuing high ratings to securities that eventually collapsed. Moody's and two other major agencies were recently subpoenaed by the state of California, and a former Moody's employee who is accusing the company of knowingly inflating ratings has taken his case to Congress. Recently passed SEC rules require increased disclosure from ratings firms, and major shareholder Berkshire Hathaway (NYSE: BRK-A ) recently cut its long-held stake in the company.
Many CAPS members don't think the activity bodes well for Moody's future. Still, 83% of the 1,130 members rating Moody's see value in the stock at these prices, and expect it to outperform the broader market.
Ultimately, whether you believe a fall in any stock is warranted, your own research is more important than collective opinions. But please use CAPS to 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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