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 AIG fell nearly 15% on Monday, after a Wall Street analyst cut the stock's price target by 40%.

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 145,000 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.

Source: Motley Fool CAPS. Price return Nov. 6 through Dec. 1.

Macy's
Parades and big balloons notwithstanding, consumers have continued to keep the purse strings tight, hurting Macy's third-quarter same-store sales and leading to a quarterly loss. The department store operator has seen some recent improvement in sales and raised its full-year earnings outlook, but even this positive news fell short of Wall Street's expectations. While rivals Kohl's (NYSE:KSS) and Nordstrom (NYSE:JWN) ended up in the black recently, Macy's still has a lot of bearish CAPS members betting against it, showing uncertainty about the company's high debt level and poor economic environment. At this point, just 53% of the 703 CAPS members rating Macy's see it beating the broader market.

Brocade
News of a possible buyout from potential suitors like Hewlett-Packard (NYSE:HPQ) a couple of months back had given shares of Brocade a boost. But the company recently denied that it was looking for a buyer. That disappointed some investors hoping for an acquisition, including Jim Cramer. The networking-equipment maker reported a 31% increase in fiscal fourth-quarter revenue, helped by its Foundry Networks acquisition, but also gave a weak first-quarter sales outlook.  Brocade says it's been positioning itself to compete with larger competitors, but it doesn't expect a full rebound until later in fiscal 2010. Despite the recent pullback in share price, though, 93% of the 605 CAPS members rating Brocade still consider it a market-beating investment.

Conn's
Shares of Conn's got hammered in October, when it warned of a potential loss in the third quarter. The sell-off continued last week when Conn's confirmed that warning, posting third-quarter red numbers that were worse than expected. The electronics retailer, which operates in the Texas region, said it had to increase its bad debt allowance in the quarter. Conn's warned that it may breach one of its debt covenants if it can't bolster its balance sheet.

The company has faced tough competition from retail giants like Best Buy (NYSE:BBY) and Wal-Mart Stores, pressuring its gross margins and pinching same-store sales. It expects further sales pressure in the fourth quarter. Despite the gloom, some CAPS members see a more attractive price after the drop, and a solid 95% of the 353 members rating Conn's expect it to outperform the broader market.                      

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 145,000-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.