3 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 CIT Group (NYSE:CIT) fell 45% Wednesday when media reported that the small business financier might have to either give control to bondholders or file for bankruptcy, leaving a grim outlook for common shareholders in either case.

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 140,000 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 past four weeks, and which have a market cap greater than $100 million and a beta of less than three. If you want to run this screen for yourself, please do -- just keep in mind that the results will update with the market.

Source: Motley Fool CAPS. Price return Sept. 4 through Sept. 29.

Navistar
Despite strong performance in each of Navistar's engine and parts businesses, demand for Navistar's trucks has been scarce. Total revenue fell 37% in the quarter, while earnings missed analysts' expectations. After its first loss to Oshkosh (NYSE:OSK) in the MRAP bid several months back, Navistar, BAE, and other bidders were once again beat out by Oshkosh for a multibillion-dollar truck contract with the Army. 

Despite the setbacks, Navistar plans to boost its international presence in a newly formed joint venture with Caterpillar (NYSE:CAT) to sell commercial trucks abroad. But the news couldn't gloss over Navistar's cut to its full-year earnings guidance due to weak demand, and the lackluster results leave only 80% of the 164 CAPS members rating Navistar bullish on its chances to outperform the market.  

Sequenom
It's been a wild ride for investors in diagnostic test maker Sequenom over recent months as the company has been trying to shake a scandal related to mishandling clinical data. Shares took another dive on Tuesday in reaction to news that the company fired its CEO and several other executives related to the investigation of the company's Down syndrome test results. It's only the latest twist in a story that started with the company's announcement in April that employees had mishandled test data, and the company is already facing an SEC investigation and investor lawsuits over publishing misleading results.

The mess leaves some CAPS members questioning how long recovery will take, and some are wondering how to know if it ever will bounce back. Still, 90% of the 606 CAPS members rating Sequenom expect it to beat the S&P.

Silicon Image
High-definition semiconductor and intellectual property company Silicon Image joined the ranks of many companies guiding for weaker performance in the upcoming quarter. It dropped its third-quarter revenue outlook as it continues to struggle through product transitions that see legacy products hurt by declining selling prices. Its operations have been burning through cash in recent quarters, but some CAPS members like the company's debt-free balance sheet and think things will improve. It owns intellectual property based on HD display standards and is working with electronics makers like Sony (NYSE:SNE) and Toshiba, and cell-phone maker Nokia to develop a common interface to hook up portable gadgets to high-definition TVs. 

Many CAPS members see a rebound for the company, as 96% of the 781 members rating Silicon Image expect it to outperform the market.

Ultimately, whether 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 5,300 stocks that 140,000-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.