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 Arena Pharmaceuticals fell 40% Tuesday after the Food and Drug Administration released briefs ahead of an advisory panel meeting that again raised concerns about safety and low efficacy for its obesity drug lorcaserin.     

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 170,000 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

China Green Agriculture (NYSE: CGA  )

****

(28.6%)

Gulf Resources (Nasdaq: GFRE  )

****

(26.4%)

Shanda Games (Nasdaq: GAME  )

****

(24.5%)

Source: Motley Fool CAPS. Price return Aug. 20 through Sept. 14.

China Green Agriculture
China Green Agriculture joined fellow agriculture peers China Agritech (Nasdaq: CAGC  ) and Yongye International (Nasdaq: YONG  ) in reporting impressive financials in its most recent quarter. Fiscal fourth-quarter sales jumped 55%, and net income increased 36%. But the market wasn't too pleased with its first-quarter earnings guidance, which came in below the average Wall Street analyst's estimates. Questions about China Green's financial reporting practices have compounded concerns, putting additional pressure on shares. Still, despite the risks of investing in a foreign small-cap stock, many CAPS members like China Green's potential to ride the high-growth Chinese agricultural market. Nearly 97% of the 1,032 members rating the stock expect it to outperform the broader market.   

Gulf Resources
Chinese bromine producer Gulf Resources is trying to right itself from the downward tailspin its shares have been in since the beginning of the year. The company recently announced that it's raising its full-year guidance, expecting the strong demand for bromine it saw in the second quarter to continue. Robust prices for the chemical are leading to renegotiated sales contracts with its customers. Many CAPS members note Gulf's strong balance sheet and healthy position in a growing industry -- just a few of the qualities that give roughly 95% of the 354 members rating the company confidence that it will outpace the market averages.       

Shanda Games
Shanda Interactive (Nasdaq: SNDA  ) spinoff Shanda Games' shares have recently been flirting with prices close to their 52-week low. The online gaming company posted weak second-quarter results that also weighed on its parent's quarterly earnings. The Chinese online gaming market is becoming more competitive, and it also faces shifting demographics, according to research firm iResearch. As such, market leader Tencent took a larger slice of the market; Shanda still holds its No. 2 spot, with a slight edge over rival NetEase (Nasdaq: NTES  ) , which holds a 15.2% share. However, Shanda Games' decreasing share price has some CAPS members jumping on board with a bullish call, believing the Chinese gaming market will still prove lucrative for the company in the long run. A near-unanimous 99% of the 332 CAPS members rating Shanda Games expect it to beat the S&P.

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 170,000-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 67 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 no shares of companies mentioned here. NetEase.com and Shanda Interactive are Rule Breakers recommendations. China Green Agriculture and Yongye International are Global Gains selections. The Fool owns shares of China Green Agriculture and Yongye International.

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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Related Tickers

12/31/1969 7:00 PM
CAGC.PK.DL $0.00 Down +0.00 +0.00%
China Agritech Inc… CAPS Rating: **
CGA $2.08 Down -0.07 -3.26%
China Green Agricu… CAPS Rating: **
GAME $6.56 Up +0.01 +0.15%
Shanda Games Limit… CAPS Rating: **
GURE $1.17 Up +0.01 +0.86%
Gulf Resources CAPS Rating: **
NTES $105.23 Up +2.53 +2.46%
NetEase.com CAPS Rating: ****
SNDA.DL $0.00 Down +0.00 +0.00%
Shanda Interactive… CAPS Rating: ***
YONG $0.00 Down +0.00 +0.00%
Yongye Internation… CAPS Rating: **

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