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, Dell (NASDAQ:DELL) had its biggest one-day percentage drop since November of 2000 when shares closed nearly 14% lower last Friday after the company released disappointing second-quarter earnings.

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 20% 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

Washington Mutual (NYSE:WM)

**

(23.9%)

Amylin Pharmaceuticals (NASDAQ:AMLN)

***

(28.2%)

Northgate Minerals (AMEX:NXG)

****

(28.3%)

McDermott International (NYSE:MDR)

****

(26.3%)

SandRidge Energy (NYSE:SD)

*****

(27.3%)

Source: Motley Fool CAPS. Price return from Aug. 1 through Aug. 29.

Washington Mutual
Retail banks like Washington Mutual and Wachovia (NYSE:WB) are taking the brunt of residential loan delinquencies, which are now at their highest point since 1991, when the Fed started measuring the data. The company has the capital to cover expected losses in the near term, but raising more cash could be difficult and costly, with its debt teetering on the brink of junk status. WaMu is also looking to its depositors as a cheap source of funds by offering terrific deals, like 13-month CDs yielding 5%. Given the headwinds, though, only 65% of the 2,923 CAPS members rating Washington Mutual expect it to outperform the market.

Amylin Pharmaceuticals
Amylin’s shares have been hit lately by news that an increased number of patients taking the company’s diabetes treatment, Byetta, have reported pancreatitis; four patients have died. Investors fear this could affect the prescribing habits of doctors and possibly affect the FDA’s opinion on the extended-release version of the drug. Thanks to its heavy dependence on the success of the drug, investors have summarily punished Amylin, though 84% of the 343 CAPS members rating Amylin Pharmaceuticals still see the stock outperforming the market.

Northgate Minerals
Northgate shares have been more than a little tarnished lately, with prices well below 52-week highs. But the prospects that its Young-Davidson mine could be reopened and could produce for another 12 years still have some investors bullish. Cash costs have been on the rise lately for Northgate’s Australia operations, but a strong copper showing at its South Kemess mine helped bring overall cash costs per ounce of gold to a range similar to that of competitor Kinross Gold for the second quarter. Wall Street shows little interest in Northgate, but 1,455 CAPS members have, with more than 96% of these expecting Northgate Minerals to beat the S&P.

McDermott International
The global infrastructure boom helped McDermott pull in $177.5 million in net income for the second quarter, representing powerful growth of 19% year over year. But the revenue jump of "only" 26%, thanks to some setbacks in offshore installation, made some investors skittish, dropping shares 13.5% in one day. The 1,094 CAPS members rating McDermott are largely bullish on the macro trends, however, with 97% of them expecting the stock to outperform the market.

SandRidge Energy
Recent IPO SandRidge Energy, which is run by Chesapeake Energy’s co-founder, had seen its shares more than double since its public debut. But the company, along with many other E&P companies, has experienced a sell-off recently, despite prospects of immense gas fields being tapped. Analysts and investors have also fretted over the sparse details on a recent 3-D seismic survey at the company’s Pinon Field, which makes up the bulk of its proven reserves. Still, a near-unanimous group of 363 of the 371 CAPS members rating SandRidge Energy expect it to outperform the market.

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.

The Motley Fool Inside Value service looks for screaming bargains in the market, and it has already recommended Dell and Chesapeake Energy to subscribers. To see what other companies the analyst team believes are priced below intrinsic value, 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 and is the author of The Qualcomm Equation. The Fool's disclosure policy is made of sugar and spice and everything nice.