3 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, shares of GameStop fell nearly 15% last Thursday when it announced falling holiday comparable sales and cut its fourth-quarter outlook.

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 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 15% in the last four weeks, and they have a market cap greater than $100 million and a beta of less than 3.

Source: Motley Fool CAPS. Price return Dec. 18 through Jan. 12.

Leap Wireless
The prepaid wireless business has seen big growth in the past year as its cheaper plans have attracted consumers looking to save money. But the growth has also brought heavy competition, and Leap Wireless is entering the new year as a price war in low-end wireless plans intensifies. Competitor MetroPCS (NYSE:PCS) recently made a move to undercut similar plans offered by Sprint Nextel's (NYSE:S) Boost Mobile and left open the possibility for further price cuts. The big squeeze caused Leap Wireless to put up disappointing third-quarter numbers, and some investors are concerned about the ongoing effects that competition will have on its performance. Today, 80% of the 196 CAPS members rating Leap Wireless expect it to beat the broader market.

Medifast
Weight loss product supplier Medifast is once again dealing with accusations about its business practices coming from the Fraud Discovery Institute. The institute's co-founder Barry Minkow has directed allegations toward executives at companies like Herbalife and Intrepid Potash in the past, and Medifast denied the recent allegations regarding its Take Shape for Life subsidiary. It posted huge third-quarter revenue gains, and some CAPS members like the demand potential of the weight loss market. But at the same time, others question the sustainability of Medifast's massive share price gains and are leary of its current valuation. As such, a lackluster 79% of the 253 CAPS members rating Medifast expect it to beat the S&P.

Tessera Technologies
Tessera Technologies' shares recently took a hit when it lowered its fourth-quarter revenue guidance because of  lower-than-expected royalties coming in from a couple of its large customers. The company brings in most of its revenue from these royalties, and being a patent king like Rambus (NASDAQ:RMBS) and Qualcomm keeps Tessera busy defending its patents in court. Sometimes, it also means compromising with licensees to keep relationships intact.

While it won a ruling against Qualcomm and Motorola (NYSE:MOT) in May, Tessera  recently lost a round against Acer and some other big name companies. But many CAPS members think its strong balance sheet and large portfolio of intellectual property give it room to grow. Overall, this future potential gives 91% of the 386 CAPS members rating Tessera Technologies reason to vote bullishly on the stock.

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.