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 UAL nosedived and lost more than 27% one day last week on fears that weakening demand for air travel would impact the major airlines.
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 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 120,000 CAPS members to make better decisions.
We've used CAPS' handy stock screening tool to quickly zero in on companies that have been slashed by at least 30% in the last four weeks, and which have a market cap greater than $100 million and a beta of less than 3.
Here's a sample of stocks our CAPS screen returned:
|
Company
|
CAPS Rating
(out of 5)
|
4-Week
Price Change
|
|
Abercrombie & Fitch (NYSE: ANF )
|
**
|
(38.4%)
|
|
JDS Uniphase (Nasdaq: JDSU )
|
***
|
(46.4%)
|
|
Goldman Sachs (NYSE: GS )
|
***
|
(37.8%)
|
|
Focus Media Holding (Nasdaq: FMCN )
|
****
|
(45.5%)
|
|
Morningstar (Nasdaq: MORN )
|
*****
|
(30.9%)
|
Source: Motley Fool CAPS. Price return from Oct. 24 through Nov. 17.
Abercrombie & Fitch
Have you been to the mall lately? I haven't, and neither have many other shoppers. Abercrombie & Fitch has been feeling shunned lately as revenue dropped 8% in the third quarter and earnings per share came in 44% lower compared to last year. Inventory also spiked 51% during the quarter as same-store sales dropped 14%. The fourth quarter isn't looking any better and now only 82% of the 989 CAPS members rating Abercrombie & Fitch expect it to outperform the market.
JDS Uniphase
JDS Uniphase provides products to big-name customers like Cisco Systems (Nasdaq: CSCO ) and AT&T (NYSE: T ) , but strong pricing pressures from increasing Asian competition and communications industry consolidations make it a tough sandbox to play in. Increased demand for its Optical Communications and Advanced Optical Technologies products helped overall revenue increase by 7% to $381 million in its fiscal first quarter, but declines in its Communications Test and Measurement group led to a net loss of $0.08 per share, lower than the loss of $0.03 last year. With a tough market seen ahead, only 80% of the 623 CAPS members rating JDS Uniphase are bullish on the company today.
Goldman Sachs
CAPS members are split on Goldman Sachs -- while the banking giant recently morphed into a bank holding company, some expect more write downs in the fourth quarter, as Goldman is still exposed to investments deteriorating in value. It's encouraging that Goldman put up $4.5 billion in earnings through the first three quarters this year and that its top executives forego bonuses, but it still needs a lifeline from the government's TARP program. More than 90% of the 5,072 CAPS members rating Goldman Sachs expect it to beat the S&P.
Focus Media Holding
The third quarter was good news for Focus Media as it reported a 64% year-over-year revenue increase to $224.8 million and also grew profits. But the fourth-quarter contains bad news in the form of lowered guidance as China's ad market weakens. But many believe China's plummeting markets are generating more reasonable valuations for Focus Media and many other Chinese companies, enough to give more than 97% of the 1,135 CAPS members rating Focus Media reason to expect it to outperform the market.
Morningstar
Even though Morningstar reported 12% fiscal third-quarter revenue growth and 10% earnings-per-share growth, the market was obviously looking for something better. Yes, assets under management slipped by 7% year over year, but the individual financial data it provides to individual investors grew by 12%, better than the 8% decline in subscription revenue at TheStreet.com. The improved standing has more CAPS investors feeling bullish these days, as now more than 97% of the 928 CAPS members rating Morningstar expect it to outpace the broader market.
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 nearly 5,400 stocks that 120,000-plus members have covered in Motley Fool CAPS.
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