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 genetic analysis instrument maker Affymetrix tumbled by 18% when it posted a larger-than-expected quarterly loss and gave a weak revenue outlook.
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. 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 140,000 CAPS members 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 past four weeks, and which have a market cap greater than $100 million and a beta of less than 3. If you want to run this screen for yourself, please do -- just keep in mind that the results will update with the market.
|
Company
|
CAPS Rating
(out of 5)
|
4-Week
Price Change^
|
|
US Airways (NYSE: LCC )
|
*
|
(27.1%)
|
|
A123 Systems (Nasdaq: AONE )
|
**
|
(26.3%)
|
|
Elan (NYSE: ELN )
|
****
|
(21.1%)
|
Source: Motley Fool CAPS.
^ Oct. 2 through Oct. 27.
US Airways
Weak travel demand has continued to hurt US Airways; the company joined peers including Delta Air Lines (NYSE: DAL ) and JetBlue in reporting falling third-quarter revenue as more are being forced to cut fares to attract customers. And like AMR's (NYSE: AMR ) American Airlines, US Airways is cutting its workforce as it tries to "right size" the business in an effort to become profitable.
US Airways' stock, along with shares in several other airlines, have been left out of the rally this year, and many CAPS members are still wary of buying into the sector. Only 57% of the 673 CAPS members rating US Airways expect it to outperform the market
A123 Systems
After a big initial response from Wall Street surrounding A123's IPO in September, shares of the lithium-ion battery maker have been on a roller-coaster ride. Before going public, the company was backed by investors like Qualcomm (Nasdaq: QCOM ) and General Electric, and many individual investors see solid potential for the company to succeed if it can score at least one major deal to supply batteries for a car company.
As it stands today, though, the company is not profitable and has yet to achieve positive cash flow, and investors expect tough competition from larger, more-established foreign players. Case in point: A subsidiary of Korea's LG beat out A123 to supply batteries for GM's Chevy Volt. As such, CAPS members show cautious enthusiasm, as 76% of the 134 members rating A123 Systems expect it to beat the market.
Elan
New cases of a potentially deadly brain infection have been linked with Elan and Biogen Idec's (Nasdaq: BIIB ) multiple sclerosis drug, Tysabri, lately, and since the drug is a big growth driver for both companies, the news obviously didn't sit well with investors. Some CAPS members are overlooking the negativity and see the fall in share price as an opportunity, since the drug still works well against multiple sclerosis compared with competitors. The future success of Tysabri may depend on how well the companies can limit the risk to patients and manage doctors' concerns about prescribing the treatment.
About 93% of the 983 CAPS members rating Elan remain bullish.
Ultimately, whether you believe a fall in any stock is warranted, your own research is more important than collective opinions. But 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 5,300 stocks that 140,000-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.
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