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 InterDigital fell 18% on Monday when the International Trade Commission confirmed its initial finding that Nokia didn't infringe on four InterDigital patents, which ended its investigation.
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 20% 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
|
|
MBIA (NYSE: MBI )
|
*
|
(28.7%)
|
|
YRC Worldwide (Nasdaq: YRCW )
|
**
|
(22.8%)
|
|
Harris & Harris Group (Nasdaq: TINY )
|
*****
|
(23.3%)
|
Source: Motley Fool CAPS. Price return Sept. 25 through Oct. 20.
MBIA
Bond insurer MBIA's shares recently took a hit when Standard & Poor's Ratings Service cut its main bond insurance business to junk status, saying that losses on mortgage-backed securities that MBIA guaranteed could be higher than expected. Risky loans continue to plague firms like MBIA and private mortgage insurer MGIC Investment (NYSE: MTG ) , which recently reported a far wider third-quarter loss compared with last year.
MBIA has sat at a lowly one-star CAPS rating for years, and many CAPS members share the same negative outlook as S&P. At this point, only about half of the 976 CAPS members rating MBIA expect it to outperform the broader market.
YRC Worldwide
The recession has hit operations hard at trucking company YRC Worldwide, similar to the drubbing shipping giants FedEx (NYSE: FDX ) and UPS (NYSE: UPS ) have taken lately. The company continues to struggle, and throughout the downturn it's had to sell assets, slash jobs, and renegotiate debt to stay afloat. It recently received an extension on certain provisions of some of its credit facilities, which buys it a small amount of time to figure out a longer-term solution. It's also been unsuccessfully trying to work out deals with union workers to cut costs.
A good portion of CAPS members see a tough road ahead: Only 80% of the 376 members rating YRC Worldwide expect it to beat the S&P.
Harris & Harris
Venture capital company Harris & Harris recently tapped the equity markets for money, significantly diluting owners and sending shares lower, but some CAPS members view it as a positive move and expect the company to put the fresh capital to good use in new and existing investments. While it's a speculative play, Harris & Harris has an impressive portfolio of young companies focusing on nanotechnology and microsystems. For example, one of its companies, Innovalight, develops high-performance solar technology being put in play by companies like JA Solar (Nasdaq: JASO ) .
Many CAPS members are bullish on the long-term outlook for Harris & Harris and believe the company has many good chances to benefit even if only a few of its portfolio companies achieve significant success. Today, 95% of the 830 CAPS members rating Harris & Harris 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. 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, and the payback is more than worth it.
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