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
|
4-Week |
---|---|---|
Advanced Micro Devices |
** |
(24.7%) |
Rentech |
*** |
(29.3%) |
FormFactor |
***** |
(27%) |
Source: Motley Fool CAPS. Price return Aug. 6 through Aug. 31.
Advanced Micro Devices
While ARM Holdings'
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
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.