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 in mattress maker Sealy sank 17% Friday on the heels of an analyst downgrade due to a dilutive recapitalization plan.
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 today. 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 130,000 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 15% in the last four weeks, and which have a market cap greater than $100 million and a beta of less than 3. If you want to run this screen for yourself, please do -- just keep in mind that the results will update with the market.
|
Company |
CAPS Rating
|
4-Week |
|---|---|---|
|
DR Horton |
* |
(23.3%) |
|
Seaspan |
*** |
(38.9%) |
|
GameStop |
**** |
(17.5%) |
Source: Motley Fool CAPS. Price return Apr. 24 through May 19.
DR Horton
Although DR Horton reported a quarterly jump in home sales in its most recent quarter and dramatically narrowed its loss, its outlook was still cautious, and management said that further deterioration of the housing market could continue. According to the Commerce Department, housing starts dropped 12.8% in April, and builders are still trying to get rid of inventory. But with the stock valuations of homebuilders still sitting at multi-year lows, at least one Wall Street analyst, Citigroup, sees a gem in one builder: Lennar. The firm gave Lennar an upgrade based upon the disconnect in valuation from its peers. CAPS members aren't biting at DR Horton yet, though -- only 44% of the 1,160 members rating it are bullish.
Seaspan
Investors have reacted more to Seaspan's 79% dividend cut lately, rather than its first-quarter results, in which revenue actually improved by 16%. The containership company is taking precautionary measures and expects to save $100 million annually from the cut, which will help with its new building program.
Seaspan recently took delivery of its fourth new containership this year, with plans for 29 more to be delivered over the next three years, all of which are committed to long-term contracts. Container shipping has been dealt a heavy blow, as many industries have, but all of Seaspan's charters have continued to perform as expected. And while several drybulk carriers such as DryShips
GameStop
Up until very recently, video-game retailer GameStop had been maneuvering its way through the recession well as video games have held up better than other industries. But game makers across the board have seen weaker sales over the past couple of months, compared to last year, as some of the bigger releases are scheduled for later this year. And just today, GameStop confirmed some investors' fears with solid but not spectacular first-quarter results and a weaker-than-hoped-for forecast for the coming quarter.
The company’' been the player in the higher-margin used-games business until recently, as several new contenders such as Best Buy, Amazon
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 more than 5,300 stocks that 130,000-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.
