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 Perfect World fell 25% on Monday after posting uninspiring results and forecasting less-than-perfect second-quarter revenue.
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. 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 160,000 CAPS members to make better decisions.
We'll use CAPS' handy stock screening tool to quickly zero in on companies with three factors: their prices have fallen at least 20% in the past four weeks, and they have a market cap greater than $100 million and a beta of less than 3.
Company |
CAPS Rating
|
4-Week
|
---|---|---|
priceline.com |
* |
(27.4%) |
TiVo |
** |
(48.1%) |
Visa |
*** |
(24.3%) |
Source: Motley Fool CAPS.
^April 23 through May 19.
priceline.com
priceline's shares had been flying high, mimicking the rise of Chinese counterpart Ctrip.com
With a one-star rating in CAPS, some members remain cautious on its ability to continue to generate hefty growth numbers and repeat past stock gains. In CAPS, a lackluster 72% of the 966 members rating priceline expect it to outperform the broader market.
TiVo
If there's one thing that is constant, it's that litigation is never settled, even when it's settled. Things had been looking up for TiVo after it received a favorable court ruling in its patent case against DISH Network
The news led to a sell-off that wiped out previous gains, and while some CAPS members believe the odds are in TiVo's favor to either win the case or score a settlement with DISH, the rehearing continues to add uncertainty. Overall, 79% of the 1,096 CAPS members rating TiVo believe it is a market-beating investment.
Visa
Both Visa and MasterCard
With Visa positioned for growth in emerging markets, and its proposed purchase of online payments company CyberSource
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 5,400 stocks that 160,000-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.