3 Stocks in a Tailspin

Individual stocks can rise 10%, 25%, or even more in a short period of time. And they can fall just as far, just as quickly. For example, shares of Houston American Energy fell nearly 29% one day a couple weeks back when an Internet news site posted an article that described the company as "set up for collapse."

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 160,000 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

Star Scientific (Nasdaq: CIGX  )

*

(31.8%)

Ballard Power Systems (Nasdaq: BLDP  )

*

(20.6%)

Santarus (Nasdaq: SNTS  )

***

(30%)

Source: Motley Fool CAPS. Price return March 26 through April 20.

Star Scientific
The smokeless tobacco market is a growing multibillion- dollar one that companies like Altria (NYSE: MO  ) and Star Scientific are trying to shape as a healthier alternative to cigarettes. But Star Scientific's dissolvable tablets and similar ones offered by Reynolds American have come under scrutiny by regulators because they look like candy, which can confuse and mislead children about their health risks. Even as tobacco producers are making significant moves toward supporting various smoking alternatives, investors are concerned about potential regulation for the so-called "tobacco candy" because the Food and Drug Administration has stepped up efforts to keep tobacco products away from children. With a string of annual losses and a lot of uncertainty, the stock has a weak following in CAPS, with just 48% of the 213 CAPS members rating Star Scientific expecting it to outperform the broader market.

Ballard Power Systems
Canadian company Ballard Power Systems has been in the fuel-cell game for a long time, but the past decade has been a very rough experience for shareholders in the company -- the stock has lost more than 90% of its value in that time. The company forecasts 35% revenue growth this year, and some investors see potential for fuel cells to play a greater role in alternative energy, but shares haven't been able to gain any sort of traction lately, and other forms of alternative energy -- mainly wind and solar -- have been diverting investors' attention away from fuel cells. CAPS members don't show much support for the stock, with only 62% of the 345 members rating the company predicting it will be a market-beating investment.

Santarus
Santarus left 2009 on a positive note with the approval of its over-the-counter version of heartburn medication Zegerid, which triggered a $20 million milestone payment from its marketing partner Merck (NYSE: MRK  ) . While the drug will have a lot of competition from Procter & Gamble's (NYSE: PG  ) Prilosec and GlaxoSmithKline's (NYSE: GSK  ) Tagamet, which have already proven successful in a multibillion-dollar market for heartburn relief, a recent federal court ruling in a patent suit against Par Pharmaceuticals could open it up to generic competition, with Par Pharmaceuticals seeking approval for a generic version. The news delivered a big blow to the stock, wiping away recent gains after a strong earnings announcement. Today, 89% of the 111 CAPS members rating Santarus still like the odds and expect the company to outperform the market.

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 other 5,400 stocks that 160,000-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.

The Motley Fool Stock Advisor service looks for companies with strong management poised to beat the market over the long haul. To see all the stocks that have helped Tom and David Gardner beat the market by 62 points on average, take a free 30-day trial.

Fool contributor Dave Mock habitually looks for silver linings in even the darkest of clouds. He doesn't own shares of companies mentioned here. Procter & Gamble is an Income Investor pick. The Fool owns shares of GlaxoSmithKline and Procter & Gamble. The Fool's disclosure policy is made of sugar and spice and everything nice.


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