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, Salesforce.com (NYSE: CRM ) was a big loser last Thursday when shares fell more than 18% as the company reported slowing growth.
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 115,000 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 25% 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
|
|
Fannie Mae (NYSE: FNM )
|
*
|
(56.7%)
|
|
American Superconductor (Nasdaq: AMSC )
|
**
|
(27.7%)
|
|
American International Group (NYSE: AIG )
|
**
|
(27.1%)
|
|
CryptoLogic (Nasdaq: CRYP )
|
****
|
(27.7%)
|
|
Global Industries
|
*****
|
(28.2%)
|
Source: Motley Fool CAPS. Price return from July 25 through Aug. 22.
Fannie Mae
Little surprise here -- falling housing prices and rising mortgage defaults continue to take their toll on Fannie Mae, affecting both shares and bonds of the company. As a recent Barron’s article pointed out to investors, there may literally be nothing left for common shareholders of Fannie Mae and sibling Freddie Mac (NYSE: FRE ) . It’s looking more likely that the Treasury is going to recapitalize both companies, and protecting the interests of common shareholders isn’t in the Treasury’s game plan -- simply keeping them alive is. As such, just over 57% of the 1,556 CAPS members rating Fannie Mae expect it to outperform the market.
American Superconductor
Hopes were high for energy technology company American Superconductor leading up to its recent earnings report, but the market dashed the stock after the company cited higher taxes and stock-based compensation in the quarter’s loss. Guidance for further losses to come through the year didn't help either, but one analyst and even a Fool see a glimmer of hope in the company's future. With its first quarter of positive free cash flow ever, a good number of CAPS members -- 447 of the 565 rating the company, in fact -- see American Superconductor beating the market in the future.
AIG
Following the lead of investment banks like Lehman Brothers (NYSE: LEH ) , insurer AIG has had its share of massive write-offs, which is one of the reasons its shares are down some 70% over the past year. AIG reported a second-quarter loss of around $5.4 billion, bolstering calls from some investors who would like to see a breakup of the company in order to shed its divisions in real estate and collateralized debt obligations (CDOs). Hoping to see things move in the right direction, 83% of CAPS members rating AIG see it outperforming the market going forward.
CryptoLogic
After its business was banned from the U.S. last year, online gaming software maker CryptoLogic was just starting to cash in on Asian and European markets. Then it surprised investors with a second-quarter loss of $1.5 million as a result of higher expenses, including general and administrative expenses that doubled. This follows from a less-than-inspiring first quarter that also fell well short of expectations. But many investors like the lower stock price and see a company that continues to expand in a lucrative industry. As such, 96% of the 1,463 CAPS members rating CryptoLogic expect it to outperform the S&P.
Global Industries
Dealing with bad weather, equipment delays, and other issues, offshore construction services firm Global Industries posted a $0.12-per-share loss for the second quarter. But some see the issues as temporary, and the long-term outlook for the sector still has many investors bullish on the stock. With Global wanting to pick up more of its fallen shares itself with a new buyback program, a solid group of CAPS members think it makes sense to invest in Global, with 97% of those rating the company bullish.
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 5,500 stocks that 115,000-plus members have covered in Motley Fool CAPS.
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