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, investors were feeling a little blue about earnings reported by network security specialist Blue Coat Systems (Nasdaq: BCSI ) last week, subsequently dunking the stock for more than a 20% loss in a single day.
Big drops in share price can sometimes signal material defects or new risks. But at other times, they're simply pullbacks after a long run-up. 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 investors' 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 105,000 CAPS investors to make better decisions.
We'll use CAPS' handy stock screening tool to quickly zero in on companies that have been slashed by at least 20% in the last four weeks, and which have a market cap greater than $100 million and a beta of less than 3. That'll keep us out of the mud-filled world of gyrating penny stocks.
Here's a sample of stocks our CAPS screen returned:
|
Company
|
CAPS Rating
(out of 5)
|
4-Week
Price Change
|
|
Exelixis (Nasdaq: EXEL )
|
****
|
(21.3%)
|
|
American International Group (NYSE: AIG )
|
**
|
(26.6%)
|
|
General Motors (NYSE: GM )
|
*
|
(24.1%)
|
|
Lehman Brothers (NYSE: LEH )
|
*
|
(20.1%)
|
|
UBS AG (NYSE: UBS )
|
*
|
(29.3%)
|
Return data is calculated as the difference between the closing price on May 1 and the closing price on May 29. Star rankings from CAPS.
Let's delve deeper into recent circumstances and find out why some of these stocks have been beaten so badly.
Driving home
There has been little solace for investors in the U.S. auto industry lately, and General Motors has once again sunk to new lows. While "big oil" continues to captivate the headlines, "big auto" isn't far behind -- especially since the price of gasoline is starting to seriously pinch consumers, forcing them to look at driving in a whole new way. Unfortunately for GM, that new way includes buying more high-MPG wheels from Toyota (NYSE: TM ) . The Japanese giant eclipsed GM in overall auto sales in the first quarter of 2008.
Strikes in its workforce and at suppliers have also continued to haunt GM, as the company tries to balance its labor force against every other challenge facing the company. The strike at American Axle cost the company $800 million in the first quarter alone, and GM estimated that it will cut production by 230,000 vehicles in the second quarter as well, leading to another $1.8 billion pre-tax hit. And while axle workers are now back on the job, 19,000 more hourly GM workers won't be, having taken an attrition package from the company.
With all the bad news surrounding the auto sector, it's no surprise that -- even beyond some recent scourging from analysts -- the general sentiment on GM in CAPS is negative. A full 61% of the nearly 4,000 investors rating GM have given the company the thumbs-down, believing the stock will continue to underperform the market. But where there's plenty of woe, there's at least a few contrarian investors looking to make a shrewd bet on a stock beaten beyond reason.
Fellow stateside automaker Ford has already seen some investors reverse course. It's had its standing upgraded in CAPS based upon turnaround efforts in the company. With GM several years into its turnaround effort, and a stock price at its lowest point in decades, plenty of CAPS' highest-ranked investors still believe that GM could be a successful investment story. With the company still paying a dividend that yields close to 6% at this point, and a strong brand, investors could certainly do worse in the field of high-risk turnaround plays.
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 5,600 stocks that 105,000-plus investors 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.
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