Individual stocks can rise 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 OncoGenex Pharmaceuticals fell more than 28% one day last week when investors were disappointed with its new licensing deal with Teva Pharmaceutical.
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 offers 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 poorer-performing peers. That way, investors can intelligently use the collective wisdom of more than 145,000 CAPS members to make better decisions.
We'll use CAPS' handy stock screening tool to quickly zero in on companies with three factors: their prices have fallen at least 20% in the past four weeks, and they have a market cap greater than $100 million and a beta of less than 3.
|
Company
|
CAPS Rating
(out of 5)
|
4-Week
Price Change
|
|
Barnes & Noble (NYSE: BKS )
|
**
|
(20.7%)
|
|
Dyax (Nasdaq: DYAX )
|
***
|
(20.6%)
|
|
GigaMedia (Nasdaq: GIGM )
|
*****
|
(21.9%)
|
Source: Motley Fool CAPS.
Price return Nov. 27 through Dec. 24.
Barnes & Noble
After Barnes & Noble posted a wider fiscal second-quarter loss and offered weak guidance late last month, its shares took a big hit. It is experiencing falling same-store sales and expects the decline to continue, because traditional bookstores have faced tight consumer spending and intense competition from online sellers. The company reported strong demand for its Nook electronic reader, but the e-book device is fending off reviewer criticism, and there have been initial shipping delays and a postponed in-store debut. Some investors are concerned about the setbacks while e-book pioneer Amazon.com's (Nasdaq: AMZN ) Kindle breaks monthly sales records and a potentially growing tablet market may challenge the Nook. In CAPS, a lackluster 72% of the 329 members rating Barnes & Noble expect it to outperform the broader market.
Dyax
Shares of Dyax have been on a wild ride in the past month. Investors enjoyed a big pop in the share price when the biopharmaceutical company received approval for its drug Kalbitor for treating acute attacks of hereditary angioedema (ViroPharma's (Nasdaq: VPHM ) preventive therapy Cinryze has also been approved to treat the disease). But only days later, Dyax's licensing partner Cubist Pharmaceuticals (Nasdaq: CBST ) halted clinical trials using the drug to reduce bleeding during heart surgery, sending shares back down. Right now, 88% of the 205 CAPS members rating Dyax are bullish on the company's prospects.
GigaMedia
GigaMedia faces stiff competition in the online gaming industry from larger and crafty competitors like NetEase.com (Nasdaq: NTES ) and Changyou, resulting in a 19% drop in revenue and a net loss of $2.4 million for the third quarter. And without any new games in the fourth quarter, it expects a quarter-to-quarter decline in revenue for its Asian business. Shares have been going down for more than two years now, but some CAPS members think the price has become more attractive, especially considering the company's cash on hand. When rating GigaMedia, a favorite in CAPS year in and year out, 98% of the 2,469 members rating see it beating the S&P going forward.
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 145,000-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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