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 ImmunoGen dropped more than 38% last Friday after the Food and Drug Administration said it wouldn't accept the accelerated approval application for its cancer drug from its development partner Roche.  

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 three.

Company

CAPS Rating
(out of 5)

4-Week
Price Change

Advanced Micro Devices (NYSE: AMD  )

**

(24.7%)

Rentech (NYSE: RTK  )

***

(29.3%)

FormFactor (Nasdaq: FORM  )

*****

(27%)

Source: Motley Fool CAPS. Price return Aug. 6 through Aug. 31.

Advanced Micro Devices
While ARM Holdings' (Nasdaq: ARMH  ) shares have pushed higher this year, reaching new 52-week highs thanks to its connection with a growing mobile device market, other chip makers such as AMD and NVIDIA (Nasdaq: NVDA  ) have faced pressure on fears of slowing PC demand. NVIDIA recently warned of weakness in Europe and China following its quarterly loss, and Intel's lowered revenue guidance sent a shockwave throughout the industry that many investors had already anticipated. Some investors like AMD at its beaten-down share price but, overall, CAPS members remain cautious with a two-star rating on the stock. Comparing bulls to bears, 81% of the 3,619 CAPS members rating AMD expect it to outperform the broader market.

Rentech
Rentech's primary strategy is focused on developing synthetic fuels, and the stock got a huge boost last year when it scored deals to sell its fuel to the military and several airlines. But being a harbinger of major change in an emerging industry doesn't come without risks -- just ask peer Syntroleum (Nasdaq: SYNM  ) , who has been very volatile lately in the face of uncertainties over government tax credits. But as Rentech looks to expand its alternative fuels business, the company is currently generating nearly all of its revenue from its nitrogen fertilizer business. Like Terra Nitrogen (NYSE: TNH  ) , it has seen improving corn fundamentals, which helped with higher volumes, but its fiscal third-quarter results were hammered by lower selling prices. Some CAPS members are willing to wait through all the ups and downs to potentially reach big breakthroughs, but many also see it as a speculative play. At this point, about 88% of the 348 CAPS members rating Rentech are bullish on its chances to beat the S&P.    

FormFactor
FormFactor's stock has continued to fall further, reaching multiyear lows as the company struggles to turn a corner. The latest leg down followed the company's recently reported quarterly loss that came despite a big increase in revenue. Then the wafer probe card maker followed this only a few days ago with a cut to its third-quarter revenue outlook. But the CAPS community is overwhelmingly bullish on the stock and sees a turnaround situation at hand despite its risks. FormFactor has a new management team in place and is transitioning to higher margin products, a move that some believe has potential to finally return the company to its former glory. In CAPS, 98% of the 1,505 members rating FormFactor see it to outperforming the broader market averages.  

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 63 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 and NVIDIA, which also is a Stock Advisor recommendation. Intel is an Inside Value selection. FormFactor is a Hidden Gems selection. Motley Fool Options has recommended a bull call spread position on FormFactor and buying calls on Intel. The Fool owns shares of FormFactor. The Fool owns shares of and has written puts on Intel.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.The Fool's disclosure policy is made of sugar and spice and everything nice.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 08, 2010, at 10:20 PM, IsthisRight26 wrote:

    Re: Rentech

    At their 2Q earnings call, RTK made a comment about anhydrous price in the mid-500's. Well, the price kept going up... just in time for lock-up of next year supplies.

    Here is the latest scoop on prices:

    Russ Quinn DTN Staff Reporter

    Bio | Email

    Tue Sep 7, 2010 04:43 PM CDT

    Print Email

    OMAHA (DTN) -- Led by anhydrous, retail fertilizer prices tracked by DTN for the fifth week of August continue to climb.

    Anhydrous prices surged 23 percent compared to a month earlier in DTN's latest survey of retail fertilizer prices. (DTN chart by Kim Adrian)

    Anhydrous surged 23 percent compared to a month earlier in DTN's latest survey. The average price for anhydrous is now at $606.50 per ton. The nitrogen fertilizer has gained $140.41 per ton over the last nine weeks, when the price stood at a paltry $466.09 per ton.

    Following right along with anhydrous are the UAN solutions and the phosphorus fertilizers. UAN32 is up 12 percent, while UAN28 was 10 percent higher. DAP saw a 9 percent increase in price, and MAP is up 7 percent. 10-34-0 was up 5 percent, while urea was up just slightly compared to a month earlier.

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