3 Stocks in a Tailspin

Individual stocks can rise 10%, 25%, or even higher in a short time. And they can fall just as far, just as quickly. For example, shares of Telestone Technologies fell 24% last Friday, a day after the company reported a drop in second-quarter earnings despite a 37% jump in revenue.

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 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

Overstock.com (Nasdaq: OSTK  )

*

(29.8%)

Corinthian Colleges (Nasdaq: COCO  )

**

(51%)

SandRidge Energy (NYSE: SD  )

*****

(24.3%)

Source: Motley Fool CAPS. Price return July 23 through Aug. 17.

Overstock.com
Similar to Amazon.com's (Nasdaq: AMZN  ) increase in second-quarter revenue on the back of strong online sales, Overstock.com posted a 32% jump in quarterly revenue, with growth across all major categories of its business. But the sales numbers still weren't enough to meet Wall Street's expectations. Thanks to higher expenses, the company ended up with a surprise loss. Most CAPS members are holding strong on their bearish opinion of the stock, keeping it at the lowest one-star rating for several years. A meager 31% of the 1,095 CAPS members rating Overstock.com expect it to outperform the broader market.

Corinthian Colleges
For-profit education companies have received more scrutiny lately, after the Government Accountability Office made more allegations regarding questionable business practices of several schools. Government data showed that Corinthian Colleges ranked among schools such as ITT Educational Services (NYSE: ESI  ) with student loan repayment rates of less than 35%. Thus, the government is considering new regulations, putting the schools at risk of losing federal financial aid funds. While some investors are circling the for-profit education sector in search of some bargains, many CAPS members remain cautious on Corinthian, rating it two stars, with 79% of the 298 members rating it expecting it to beat the market averages.

SandRidge Energy
SandRidge Energy hasn't been sitting still as its shares steadily declined over the past year: It made some significant moves to gain more oil exposure amid weaker natural gas prices, among them its purchase of Arena Resources. While peers Brigham Exploration (Nasdaq: BEXP  ) and Apache (NYSE: APA  ) recently beat analysts' quarterly expectations with strong results, SandRidge's shares were slammed after the company missed analysts' revenue expectations and cut its full-year production guidance. This is despite 36% top-line growth and a quarterly profit, compared with a loss a year ago. SandRidge's balance sheet is weighed down by a lot of debt, but some CAPS members are betting on a turnaround. They've rated the company five stars -- the top rating -- despite some eyebrow-raising metrics. In CAPS, 97% of the 1,010 members rating SandRidge Energy are 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.

The Motley Fool Rule Breakers service has selected dozens of world-changing stocks poised to beat the market over the long haul. To see all the stocks David Gardner and the analyst team have recommended, take a free 30-day trial today.

Fool contributor Dave Mock habitually looks for silver linings in even the darkest of clouds. He doesn't own shares of companies mentioned here. Amazon.com is a Stock Advisor selection. The Fool's disclosure policy is made of sugar and spice and everything nice.


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