Individual stocks can surge 10%, 25%, or even higher in a short period of time. And they can fall just as far, just as fast. Witness the 11% drop in stock of American Airlines' parent AMR (NYSE: AMR) early last week when thousands of travelers were stranded as planes were pulled from routes for inspections.

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, 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 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 96,000 CAPS investors to make better investing decisions.

To put this into practice, we'll screen for stocks that have been slashed by at least 15% 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.

Company

CAPS Rating
(out of 5)

1-Month
Price Change

Focus Media Holdings (Nasdaq: FMCN)

*****

(28%)

Universal Insurance Holdings (NYSE: UVE)

****

(28.3%)

Garmin (Nasdaq: GRMN)

****

(15.6%)

First Fed Financial (NYSE: FED)

*

(23.8%)

Return data is calculated as the difference between the closing price on March 7 and the closing price on April 10, as per MSN Money's screen. Star ranking from CAPS. Data as of April 10, 2008.

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

Navigating the downward slope
Over the longer term, selling GPS navigation devices has been a booming business for Garmin and a great investment for shareholders. But after rising tenfold in the five years prior to the end of 2007, stock in Garmin is now down more than 50% over the past six months. As the market for personal navigation devices (PNDs) has heated up in the past few years, pressure has come to bear on prices, and hence margins, mainly due to competition from rivals like TomTom and more recent entrants like Nokia (NYSE: NOK) and Apple.

Garmin and TomTom started gunning for each other's home turf recently -- TomTom wants a big piece of the U.S., while Garmin wants to dominate Europe. That means both must make strong moves to unseat the other, which means competing on price. Garmin has been very successful at growing its international presence, with sales outside the U.S. growing 64% in 2007, but the bad news is that earnings growth has been falling short of revenue growth.

A profit warning from TomTom last week sent Garmin shares lower yet again, as investors see the issue of price erosion carrying over. But in CAPS, Garmin still garners high favor with investors who like the leading company with shares priced low compared to growth. Of the 1,027 All-Star investors rating the company, all but 52 expect the company to outpace the S&P going forward.

Losing focus
The highest-ranked stock on our list this week, Focus Media, hails from China and operates a diversified advertising network in just about every type of locale where Chinese gather, drive, or consume products. But Focus Media recently lowered its 2008 guidance as it expects ads sent to wireless phones via short messages to be curtailed significantly.

Although the company's recent earnings report blew the market away, the company also released a new "No Spam" policy that prohibits sending mobile advertisements to users without their explicit permission. Since Focus Media earns its revenue from advertisers that pay for each ad sent, the new policy will take a serious cut out of revenue in that business.

But CAPS investors are still largely bullish on the prospects for the rest of Focus Media's ad business through channels such as electronic billboards and in-store displays. CAPS investors still consider the company to be one of China's best stocks, giving the company a top five-star rating, with bullish votes coming from more than 97% of the 823 investors who have rated the company.

Ultimately, whether 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 96,000-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 top stocks like Garmin that are priced below their potential. To see all the stocks that have helped Tom and David Gardner beat the market by 36 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 shares of Garmin.. Garmin is both a Stock Advisor and Global Gains recommendation. Apple is also a pick at Stock Advisor. The Fool's disclosure policy is made of sugar and spice and everything nice.