Individual stocks can surge 10%, 25%, or even higher in a short period of time -- and fall just as far, just as fast. Shares of Schering-Plough (NYSE: SGP) plunged 26% in a single day, accompanied by a nearly 15% drop in shares of partner Merck (NYSE: MRK), when news broke that their cholesterol drugs Zetia and Vytorin were no better than cheap generics at reducing buildup in arteries.

Sometimes, big drops in share price can signal material defects or new risk in a company. But at other times, they're simply pullbacks after a long run-up. Fortunately, Motley Fool CAPS is 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 investors' opinions count more in shaping each company's rating than the picks of their poorer-performing peers. This allows investors to intelligently use the collective wisdom of more than 95,000 CAPS players to make better investing decisions.

To put this into practice, we'll screen for stocks that have been slashed by at least 25% in the past month, and that have a market cap of greater than $100 million and a beta of less than 3. That'll keep us out of the mud-filled world of gyrating penny stocks.

Here's a sample of stocks our screen returned.


CAPS Rating
(out of 5)

Price Change

North American Paladium (AMEX: PAL)



VeriFone Holdings (NYSE: PAY)



Shuffle Master (Nasdaq: SHFL)



USANA Health Sciences (Nasdaq: USNA)



UAL (Nasdaq: UAUA)



Return data is calculated as the difference between the closing price on Feb. 29 and the closing price on April 3, as per MSN Money's screen. Star ranking from CAPS. Data as of April 3, 2008.

Let's add a little color to recent circumstances and find out why some of these stocks have been beaten so badly.

Flying into the wind
Many airline stocks -- including United's parent UAL -- have been in a figurative tailspin lately, as rising fuel costs bloat carriers' expenses and erode their operating margins. Airline companies were already looking lousy when oil was "only" $50 a barrel. With the price now doubling to what most once considered an absurd level, many industry leaders are now publicly admitting that consolidation might be the only refuge for beleaguered airlines.

Reporting a 2.7% drop in passenger traffic in March, and having recently grounded its Boeing 777 fleet for missed inspections, has rubbed more salt in UAL's wounds. The fact that many other major carriers are company to UAL's misery, grounding airplanes and cancelling flights under more FAA scrutiny, may help investors feel a little better. Unfortunately, it does nothing to help the stock.

With the economy showing nothing but consumer belt-tightening, and almost nothing positive to look forward to, it's no wonder that CAPS investors generally give UAL a snowball's chance to beat the market going forward. Indeed, out of the 78 All-Star investors rating the company, more than 75% have logged bearish votes.

Asking for a beating
For all those investors who missed the daily reports of yet another company waking up and realizing that it had somehow, unbeknownst to upper management, cooked the books -- take heart. VeriFone, developer of transaction systems and services, discovered late last year that it had improperly accounted for sales costs in the first nine months of 2007 and would need to restate earnings for the period.

The initial shock sent shares plunging, but things got even worse as the company unraveled the mess. The latest plunge, to its 52-week low, followed the company's announcement of the completion of the audit, complete with a higher-than-expected ding on operating income and the resignation of VeriFone's CFO.

CAPS investors are a little torn on VeriFone at this point -- while many believe the accounting issues are behind it, and a cheap valuation remains, some still recommend staying away. Still, out of 305 investors rating the company, 282 believe it will beat the S&P going forward.

Ultimately, whether or not you believe the reasoning behind a fall in any stock, your own research is more important than collective opinions. Still, CAPS can 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 our 95,000-plus investors 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.

The Motley Fool Stock Advisor service recommends only the best stocks at the best prices. To see all the stocks that have helped Tom and David Gardner beat the market by 38 points on average, take a free 30-day trial.

Fool contributor Dave Mock habitually looks for silver linings in even the darkest of clouds. He owns no shares of companies mentioned here. Dave is the author of The Qualcomm Equation. The Fool's disclosure policy is made of sugar and spice and everything nice.