3 Stocks in a Tailspin

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 Gramercy Capital fell 40% on Monday after it reported weak fourth-quarter results and said it would explore "strategic options" for its realty unit.

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 160,000 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 20% in the last four weeks, and they have a market cap greater than $100 million and a beta of less than 3.

Source: Motley Fool CAPS. Price return Feb. 19 through March 16.

Cytori Therapeutics
As Cytori's shares continued to rise late last year, the sentiment among CAPS members plummeted, as the stock fell from a five-star rating to just one star in record time. It didn't take long for the stock to follow the rating fall. Cytori investors were hit with a double whammy recently when the company released a wider-than-expected fourth-quarter loss and said it will need more testing in order to get its Celution system approved by the FDA, delaying its potential to bring it to market. 

While some CAPS members like the long-term potential of regenerative medicine, the added cost and time needed to bring Celution to market is a big risk to a company burning more cash. The volatility and high risk associated with Cytori and other stocks like Geron (Nasdaq: GERN) or StemCells (Nasdaq: STEM) also has many investors hedging, with only about 72% of the 200 CAPS members rating Cytori Therapeutics voting it to outperform the market.

MannKind
The FDA threw a wrench in the spokes of biotech company MannKind; the company announced Monday that the regulatory agency wants more information on its inhaled insulin drug, Afrezza. 

Company founder Alfred Mann has used his pocketbook to keep the company afloat and hopes that Afrezza will succeed where Pfizer's (NYSE: PFE) Exubera failed miserably a few years ago. But the FDA, as well as many analysts and investors, may be questioning the drug's need in the market. MannKind sought to ease investors' fears during the conference call following the news, but with a marketing partner yet to be found and uncertainty surrounding Afrezza, only a lackluster 77% of the 500 CAPS members rating MannKind see it beating the broader market, keeping the company at its long-standing two-star rating.

DragonWave
Broadband network equipment provider DragonWave's shares have taken a step back after reaching all-time highs earlier this year, following record fiscal third-quarter financials and an increased revenue outlook for fiscal 2010. While CAPS members like the future demand outlook as wireless companies upgrade their networks, some investors would like to see a broader diversification of its revenue beyond the overwhelming percentage coming from Clearwire, the WiMAX company majority-owned by Sprint Nextel (NYSE: S). 

Despite the recent drop, 91% of the 71 CAPS members rating DragonWave see it as a market-beating investment.

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 160,000-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.