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 Weight Watchers took a 15% hit last Friday after the company announced another year-over-year quarterly decline in earnings and issued a disappointing 2010 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 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 150,000 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 3.
|
Company
|
CAPS Rating
(out of 5)
|
4-Week
Price Change
|
|
STEC (Nasdaq: STEC )
|
***
|
(24.6%)
|
|
Dean Foods (NYSE: DF )
|
***
|
(16.7%)
|
|
Shanda Games (Nasdaq: GAME )
|
****
|
(28.1%)
|
Source: Motley Fool CAPS. Price return Feb. 5 through March 2.
STEC
Many investors were hoping that the inventory overhang issues with major customer EMC (NYSE: EMC ) would blow over more quickly, but based upon STEC's recent outlook, this albatross is hanging around for a while. CAPS members note many solid qualities to like about the company -- like its balance sheet that's stacked with cash and good long-term potential. But investors and analysts are also concerned about possible competitive threats from others like Seagate (NYSE: STX ) .
A flurry of Wall Street analysts moved to adjust their opinions of the stock after STEC's recent guidance, and in CAPS, the stock sits at three stars, with 91% of the 720 members rating the memory maker expecting it to beat the broader market.
Dean Foods
Some investors are questioning the ability of Dean Foods to keep sales of branded products strong as consumers opt for lower-priced private label goods amid rising commodity prices. The dairy-food maker was hit with higher commodity costs and expenses in its most recent quarter leading to a hit to earnings. While shares of Bill Ackman favorite Kraft (NYSE: KFT ) have been making their way higher recently, shares of Dean Foods have been trolling around much lower after a weaker than expected quarterly earnings report and disappointing 2010 guidance.
In CAPS, a lukewarm 86% of the 285 members rating Dean Foods believe it will be a market-beating investment.
Shanda Games
Shanda Interactive (Nasdaq: SNDA ) subsidiary Shanda Games pulled in a solid fourth quarter, with strong revenue growth coming from its multiplayer online games, which helped lead to a 44% surge in earnings. But investors were quick to punish shares thanks to the company's sales forecast that calls for a sizable drop in first-quarter revenue.
Shanda Games shares are trading far lower than where they debuted in their IPO last year, but many bullish CAPS members remain undeterred, citing the long-term outlook for online gaming in China and Shanda Games' strong position in the industry. As such, over 95% of the 177 CAPS members rating Shanda Games expect it to outperform the broader market.
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 150,000-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.
RSS Headlines
Fool UK