5 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 Wachovia lost 81% on Monday as it took its turn in the takeover bay, getting scooped up by Citigroup.

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 30% 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:

Source: Motley Fool CAPS. Price return from Sept. 5 through Sept. 29.

National City
No banks are safe on Wall Street these days, and investors took shares of National City down 63% on Monday alone. After all, its exposure to high-risk mortgage loans led to a $1.76 billion loss for the second quarter. But the bank has been taking drastic steps to distance itself further from bad loans, and it does have the benefit of a $7 billion capital infusion from earlier this year.

To entice its customers to stay put and tame any risky spending, National City is also offering its customers $200 to close their home equity lines of credit. Many investors are still wary of the risk in banks, though, and only 54% of the 932 CAPS members rating National City expect it to outperform the market.

US Steel
Many domestic steel companies have been on the decline lately as the economy is slowing and a recently appreciating U.S. dollar makes for higher costs for their foreign buyers. Lower demand from the struggling auto industry is also contributing to a weaker outlook for steel products. But the low valuations in steel companies (US Steel holds a current P/E of 7) have some investors looking at the sector as a bargain bin. Indeed, 91% of the 1,152 CAPS members rating US Steel see it beating the market.

Apple
I guess things have been too good for too long. Apple is taking its lumps alongside Research In Motion (NASDAQ:RIMM), with shares now almost half the level of the Mac maker's 52-week high. Apple recently received two separate Wall Street downgrades, with concerns centered on slowing Mac and iPhone sales. Still, plenty of investors see a good buying opportunity, since the company sits on $20.8 billion in cash and investments. Overall, 92% of the 19,417 CAPS members rating Apple remain bullish.

Mosaic
When the price of key fertilizer ingredients soar several times over in a couple of years, it's no surprise that farm and fertilizer suppliers think something smells funny with phosphate and potash providers. Along with PotashCorp (NYSE:POT), Mosaic is one of several fertilizer companies named in recent lawsuits alleging price-fixing and collusion.

But Mosaic's fundamentals remain strong, and investors eagerly await its earnings announcement today after market-close. A global economic slowdown has lessened demand, but tight supply in the fertilizer industry makes significant fertilizer price drops unlikely. As such, 94% of the 1,955 CAPS members rating Mosaic expect it to outperform the S&P.

Gerdau
Gerdau is Brazil's largest long, rolled steel manufacturer, and it benefits from operating in a region of strong, emerging growth. But a pullback in commodities prices and the swoon in the steel sector have recently weighed on shares of many Brazilian stocks as well. Gerdau continues to invest though, and in a move to further profit from Brazil's building boom, the company plans to invest $1.4 billion which will boost production sixfold in its Peruvian unit. More than 98% of the 1,003 CAPS members rating Gerdau have faith that is will 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 is just there to help you quickly focus your due diligence.

Add your take on these or any of the 5,400 stocks that 115,000-plus investors have covered in Motley Fool CAPS.

On Oct. 7, 2008, Fool Co-Founder David Gardner and his Motley Fool Pro team will invest $1 million in a portfolio designed to help you make money in any market. In the coming weeks, the team, relying heavily on proprietary CAPS "community intelligence" data, will establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds (ETFs). To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.