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, Sears Holdings lost nearly 12% of its value one day last week after posting a surprise quarterly loss.
Big drops in share price can sometimes signal material defects or new risks. But at other times, they're simply pullbacks in line with the larger pessimism facing the market. 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 star rating than do the picks of their poorer-performing peers. That way, investors can intelligently use the collective wisdom of the 140,000 CAPS members to make better decisions.
Today, 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. 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 |
|---|---|---|
|
Leap Wireless |
** |
(33.8%) |
|
Ascent Solar Technologies |
*** |
(23.6%) |
|
American Capital |
**** |
(29.6%) |
Source: Motley Fool CAPS. Price return July 31 through Aug. 25.
Leap Wireless
Like fellow prepaid wireless carrier MetroPCS, Leap Wireless posted disappointing results for the second quarter, adding fewer net customers than analysts were looking for. While the economy has drawn many consumers to prepaid plans like the ones Leap offers, the company has faced increasing competition from providers like Sprint Nextel's Boost Mobile, which added 938,000 net new customers in the quarter.
And as behemoths Verizon Wireless and AT&T rapidly pursue next-generation wireless technology services, Leap and MetroPCS will be forced to follow with their own technology upgrades, prompting some investors to call once again for the companies to revisit the idea of merging.
Roughly three-quarters of the 182 members rating Leap Wireless in CAPS expect it to outperform the market.
Ascent Solar
Development-stage flexible PV maker Ascent Solar was recently on a long list of solar players, including Solarfun Power
The company is currently relying on public and private equity financing to fund operations and equipment purchases for a new 30-megawatt production facility in Colorado. The company remains in the red and expects to stay there until it completes the facility and ramps up to full capacity.
Yet the company still draws many fans in CAPS; nearly 92% of the 451 members rating Ascent Solar see it beating the broader market.
American Capital
Shareholders in American Capital and Allied Capital
Many CAPS members remain optimistic, though, and believe the company will work through its debt situation. The company recently filed a $1.5 billion shelf registration with the SEC, giving it the option to raise more capital. But despite the effort to improve liquidity, S&P cut the company's credit rating with a negative outlook and expects its portfolio to continue to deteriorate.
Despite the risks, 94% of the 1,958 CAPS members rating American Capital are bullish.
Ultimately, whether you believe a fall in any stock is warranted, your own research is more important than collective opinions. But 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 5,300 stocks that 140,000 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.
