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 SciClone Pharmaceuticals fell 29% Tuesday after it said it's under investigation by the Securities and Exchange Commission and Department of Justice regarding its compliance with the Foreign Corrupt Practices Act.   

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 at least 15% in the past four weeks, and they have a market cap greater than $100 million and a beta of less than three.

Company

CAPS Rating
(out of 5)

4-Week
Price Change

Pacer International (Nasdaq: PACR  )

**

(26.3%)

Western Digital (NYSE: WDC  )

***

(22.4%)

Seagate Technology (Nasdaq: STX  )

***

(21.6%)

Source: Motley Fool CAPS. Price return June 16 through Aug. 10.

Pacer International
Shares of Pacer International surged dramatically earlier this year after inking a multiyear agreement with Union Pacific and outperforming Wall Street's expectations in the first quarter. It recently reported another quarter of rising earnings and revenues, while trucker YRC Worldwide (Nasdaq: YRCW  ) narrowed its second-quarter loss and saw an uptick in sequential volumes as well. But one Baird analyst thinks the party may be over for now and believes it will be difficult for the company to reach earnings goals in the near future. Some CAPS members have also lost confidence, too, taking its CAPS rating from four stars to two in recent months, favoring instead stronger players in the transportation segment. Still, close to 90% of the 304 CAPS members rating Pacer International expect it to outperform the broader market.   

Seagate and Western Digital
Fears have been brewing among investors over Seagate's and Western Digital's margins as intense competition and weakening demand have put a damper on hard disk drive prices. Both companies reported rising revenues in their most recent quarters but forecasted weak current quarters, putting further selling pressure on shares of both. While strong demand for mobile devices has helped boost flash memory chip maker SanDisk's (Nasdaq: SNDK  ) shares up nearly 140% in the past year, Seagate's and Western Digital's shares are now scraping along 52-week lows as PC and notebook demand may be showing signs of weakness.

JPMorgan said it has seen slowing PC product demand coming out of Taiwan as major manufacturers like Hewlett-Packard (NYSE: HPQ  ) have pushed out orders, leading it to cut third-quarter estimates of chip maker Intel (Nasdaq: INTC  ) despite its recent record quarter. Barclays slashed estimates for Seagate and Western Digital on similar concerns, and the CAPS community has kept both companies' ratings at a relatively neutral three stars for months. But there are more than a few investors using the words "bargain opportunity" these days, with both companies commanding amazingly low share premiums. While both stocks tend to move hand in hand, there are significant differences in their strategy and position -- Seagate commands higher average selling prices for its drives while Western Digital has a stronger balance sheet with minimal debt.                                                       

About 93% of the 1,083 CAPS members rating Seagate expect it to outperform the market while a similar 94% of the 1,264 rating Western Digital take a bullish stance.

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 5,400 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.

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 owns shares of Intel, which is an Inside Value pick. The Fool owns shares of and has written puts on Intel. Motley Fool Options has recommended buying calls on Intel. The Fool's disclosure policy is made of sugar and spice and everything nice.


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  • Report this Comment On August 12, 2010, at 3:28 PM, Mustang6147 wrote:

    YRC is still an incredible deal at that price. There are alot of other companies that do not have the finacials and yet for some reason stocks and investers revere. That is beyond me. Take oil for example. A huge ripoff, technology is focused on using less of this comodity, but the price still surges??? YRC has alot of equipment, land, and buldings along with an established global network. to buy shares under $1 is an unbelievable value.

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