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 Vical fell 32% on Wednesday after the blood-vessel drug it licensed to sanofi-aventis failed a late-stage clinical trial.

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 last 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

Arena Pharmaceuticals (Nasdaq: ARNA  )

**

(73.6%)

China-Biotics (Nasdaq: CHBT  )

**

(34.6%)

Genoptix (Nasdaq: GXDX  )

*****

(17.1%)

Source: Motley Fool CAPS. Price return Aug. 27 through Sept. 21.

Arena Pharmaceuticals
Recent weeks have been brutal for Arena Pharmaceuticals as shares have plunged deeper into penny stock territory. More investors are questioning the future potential of its obesity drug lorcaserin to gain approval from the Food and Drug Administration in October after an FDA advisory panel recommended against approval because of safety concerns. The cold reception to the drug came just a couple of months after a similar rejection for Vivus' (Nasdaq: VVUS  ) Qnexa and ahead of a panel meeting for Orexigen Therapeutics' (Nasdaq: OREX  ) Contrave in December. CAPS members have already dinged Arena's CAPS rating in recent months, and the grim outlook for the drug has also prompted a more pessimistic view from Wall Street analysts. Still, 92% of the 663 CAPS members rating Arena Pharmaceuticals are betting the stock will eventually beat the broader market.

China-Biotics
China-Biotics posted strong sales and earnings growth in its most recent quarter, but similar to the investor scrutiny of China Marine Food Group's (NYSE: CMFO  ) recent acquisition of Hi-Power energy drink, China-Biotics is among a number of Chinese companies whose transparency has come into question. China-Biotics has particularly come under attack from Citron Research, a financial watchdog that has gone to great lengths to present its case against the stock, making allegations about the size of the company's reported network of stores. And it has caught the attention of many CAPS members who have recently downgraded the stock's CAPS rating in short order from five stars to two. Despite the questions about the company's integrity, roughly 92% of the 364 CAPS members rating China-Biotics still hold a bullish call.   

Genoptix
While larger competitor Genzyme's (Nasdaq: GENZ  ) shares have been flying high on hopes it will work out a takeover deal with its pursuer sanofi-aventis, Genoptix has seen its shares tank in recent months. After chopping its full-year guidance back in June, Genoptix is again revising its estimate downward as the medical diagnostics company expects a dip in third-quarter revenue and a hit to full-year earnings because of expansion costs. The current economy is suppressing the number of patients visiting doctors, but many investors like its financial standing and many CAPS members still see solid growth potential and have kept a bullish outlook for the small-cap stock. Overall, 98% of the 675 CAPS members rating Genoptix believe it will outperform the 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 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 70 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.

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.


Read/Post Comments (9) | Recommend This Article (3)

Comments from our Foolish Readers

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 23, 2010, at 9:15 PM, chinabully wrote:

    Dave Mock... are you a researcher or a dimwit..? you wrote.."China-Biotics has particularly come under attack from Citron Research, a financial watchdog that has gone to great lengths to present its case against the stock, making allegations about the size of the company's reported network of stores"

    CITRON RESEARCH IS A SCAM website run by a convicted felon. DO YOU KNOW THAT? Do you know who runs CITRON RESEARCH?

    Do some research ya deadbeat.

    CB

  • Report this Comment On September 23, 2010, at 9:21 PM, chinabully wrote:

    Davey boy.... one more thing. Whats your definition of a FINANCIAL WATCHDOG? I want you readers to know what a SCHLEPPER you are.

    TELL THE AUDIENCE WHAT A FINANCIAL WATCHDOG IS?

    TELL THE AUDIENCE HOW MUCH RESEARCH YOU PUT INTO YOUR WORK.

    My view is you dont know squat about what you write.

    CB

  • Report this Comment On September 23, 2010, at 9:25 PM, chinabully wrote:

    Oh davey boy ...sorry forgot..this guy named WALDO MUSHMAN / JOHN BIRD...he says the motley fool guys wear pointy hats and they dont know poop. Waldo is a heavy hitter SHORT play dude that lives in Texas. Do you wear a pointy hat ?

    CB

  • Report this Comment On September 23, 2010, at 9:29 PM, chinabully wrote:

    davey. mock..you have a position in CHBT ?? SHORT I assume?

    why no disclosure?

    CB

  • Report this Comment On September 24, 2010, at 9:21 AM, cool3bearsStock wrote:

    VVUS_Share Holder Watchout

    I think VVUS will drop anytime soon because base on their 2 yrs data is not impress me. They do not issue any cancer involve I believe FDA will go with the Panel recommend. NO NO NO..Sell SEll don't want to be like Arna. It struggle to gain any ground.

  • Report this Comment On September 24, 2010, at 10:08 AM, egarl wrote:

    Dave, you have really missed the story on China Biotics. The shorts have driven it down but for the shrewd investor that is a windfall. Ever hear of the market adage "When there is fear in the street, buy."?

    If chbt had a smart ir staff they would already be out with enough info to rally the stock. But they don't so it will take awhile and that is fine with me. I just bought several thousand shares and expect the price to more than triple by June 2011. Mark that down on your calendar!

  • Report this Comment On September 24, 2010, at 10:56 AM, cool3bearsStock wrote:

    Hey VVUS share Holder

    The Market with 200+ right now VVUs still going down. Is there something going on. I remember when Arna review it goes down just like that. I think it a sign of Slam..I think I would sell mine VVUS before it to late..What u think?

  • Report this Comment On September 24, 2010, at 11:07 AM, ArnaAnalysis wrote:

    According to the World largest brokers and Analysis information, ARNA is a strong buy because after this incident, the price will go back up at least $4 sometime next week.

  • Report this Comment On September 28, 2010, at 3:37 PM, ArnaAnalysis wrote:

    Arena sign new collaboration agreements with Ortho-McNeil-Janssen Pharmaceuticals, Inc. Stock will go up to $6

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9/30/2014 4:00 PM
ARNA $4.19 Down -0.06 -1.41%
Arena Pharmaceutic… CAPS Rating: **
CHBT.DL $0.00 Down +0.00 +0.00%
CHINA BIOTICS INC CAPS Rating: *
GENZ.DL $76.25 Down +0.00 +0.00%
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