3 Stocks in a Tailspin

Individual stocks can surge by 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 Smart Balance fell by 24% Tuesday after the maker of butter-like spreads issued a lower sales 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 165,000 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 by at least 15% in the past 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 May 21 through June 15.

Rambus
The payoff in Rambus' long-running patent lawsuit against Micron (Nasdaq: MU) and Hynix Semiconductor could be huge, but investors betting on a big win will have to wait longer for a final decision after a federal appeals court recently said Rambus will have to reargue its case. The delay is another setback for the company's ongoing litigation activities that involve a number of companies, including a case with the International Trade Commission against NVIDIA and others where the decision was delayed last month. Some CAPS members like the wealth of patents that Rambus owns but have had to stomach drops in share price each time a negative ruling is announced. Its CAPS rating has been sitting at a subpar two-star rating so far this year, with 83% of the 535 members rating Rambus expecting it to beat the broader market.

Celldex
Shares of Celldex have seen a big rise this year, but the stock recently went searching for a bottom again as investors try to gauge the potential of its pipeline. Partner TopoTarget paid the company a $3 million sublicense payment after TopoTarget inked a deal with Spectrum Pharmaceuticals for anti-cancer drug Belinostat. But many investors are selling these days as more data has been released on drug candidate CDX-110 that it is testing with partner Pfizer (NYSE: PFE) -- despite results the company is pleased with. The drop notwithstanding, enough CAPS members have recently made a bullish call on the stock to bump its rating up to three stars, as 91% of the 155 CAPS members rating Celldex now see it outperforming the S&P.

Tellabs
Bullish investors cheered back in late April, when telecommunications equipment provider Tellabs blew past Wall Street's first-quarter expectations. But with two customers Verizon and AT&T (NYSE: T) making up about half of its revenue in 2009, investors began to get jittery when speculation started flying that AT&T may jump ship and buy equipment from never-to-be-discounted Cisco (Nasdaq: CSCO) and a Morgan Stanley analyst downgraded the stock. Tellabs responded by recognizing increasing competition in the space, but denies any worsening relationship with AT&T. As shares started to drop late last month, CAPS members took Tellabs' rating down a notch. The stock now sits at an average three stars, with 87% of the 347 members rating Tellabs still bullish.

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 5,400 stocks that 165,000-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.