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 CVS Caremark (NYSE:CVS) fell 20% one day last week when it said it lost out on about $3.7 billion in pharmacy benefit and Medicare contracts.

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 25% 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.

Source: Motley Fool CAPS. Price return Oct. 16 through Nov. 10.

Crocs
Although footwear maker Crocs posted a third-quarter profit, much of it was owed to a one-time tax gain. Investors punished shares after the company forecast a deeper-than-expected loss in the fourth quarter. Earlier in the year, the company was labeled with a going-concern warning. It's also been trying to cut costs and write down inventory in a difficult economy. Many CAPS members believe that the popularity of Crocs' shoes is waning, and they find prospects for long-term appreciation in Crocs' stock pretty scary. Overall, only 70% of the 2,297 CAPS members rating Crocs see it beating the broader market.

Smith Micro
Wireless software maker Smith Micro lost more than one-fifth of its value last week, after it surprised investors with a lowered full-year revenue forecast thanks to the struggling economy. It swung to a profit in the third quarter compared to a loss last year, and grew revenue by a modest amount, but the company said it remains uncertain about revenue in the fourth quarter. Some CAPS members feel that the sell-off was overdone, unjustified by the size of the cut in its full-year forecast. They point to the strong trailing free cash flow the company has generated in recent quarters, as well as its solid cash balance and lack of debt. With a top-tier customer list including AT&T, Verizon (NYSE:VZ), and Sprint Nextel, many in CAPS remain bullish; 96% of the 810 members rating Smith Micro expecting it to outperform the S&P.

Harmonic
Lower sales in the U.S. have hurt video-on-demand and HDTV product maker Harmonic recently, weakening its third-quarter sales and earnings. Like Crocs and Smith Micro, Harmonic also stirred little excitement with its forecast for feeble fourth-quarter revenue. The company competes with other stalwarts such as Cisco Systems (NASDAQ:CSCO) and Motorola, and it's still seeing cautious customer spending. 

It's not all bad, though. The company is enjoying some strength in its strategy of international expansion. In addition to serving customers like Comcast (NASDAQ:CMCSA) and EchoStar in the U.S., it's recently picked up wins in Europe, Latin America, and China, with companies such as Deutsche Telekom and Sky Brazil, as HDTV demand grows across the globe. Some CAPS members think its strong balance sheet give it a good backstop and see further potential ahead; 95% of the 276 rating Harmonic in CAPS are bullish on the stock.    

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 5,300 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.