3 Stocks in a Tailspin

Individual stocks can rise 10%, 25%, or even more in a short period. And they can fall just as far, just as quickly. For example, shares of Fannie Mae fell 39% while Freddie Mac fell 38% last Wednesday after it was announced that both stocks would be delisted from the New York Stock Exchange.  

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 offers 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 165,000 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 15% in the past four weeks, and they have a market cap greater than $100 million and a beta of less than 3.

Source: Motley Fool CAPS. Price return May 28 through June 22.

Flagstar Bancorp
Flagstar's shares were dropping deeper into penny stock territory after the company recently reported a wider quarterly loss: Even the completion of a reverse stock split hasn't reversed the trend. While peer Huntington Bancshares (Nasdaq: HBAN) turned a profit in the first quarter and expects to be profitable in 2010, and larger competitor JPMorgan Chase (NYSE: JPM) posted a 4% increase in first-quarter retail banking profit, Flagstar posted falling net interest margin and had to raise more capital by offering steeply discounted common stock. With troubled loans still weighing Flagstar down, many CAPS members are steering clear of the stock, with just 53% of the 86 CAPS members rating Flagstar Bancorp expecting it to outperform the broader market.

FuelCell Energy
Just days after its shares rose significantly when FuelCell Energy won a $12.6 million contract from Pacific Gas and Electric, the company delivered fiscal second-quarter results that fell short of Wall Street's expectations, sending shares down. FuelCell Energy posted a quarterly loss, with revenue falling 27.5% because of lower product sales. Similar to peer Ballard Power Systems, which is rated one star in CAPS, FuelCell's shares have been on the decline with little support in CAPS because some members aren't sold yet on the economics and commercial viability of fuel cells over other forms of alternative energy. At this point, about 81% of the 641 CAPS members rating FuelCell Energy are bullish.

Boyd Gaming
Boyd Gaming's shares went on a big run earlier this year because many investors had anticipated an improving gambling sector. Hedge fund manager John Paulson, for instance, recently bought big positions in Boyd Gaming and MGM Mirage (NYSE: MGM). And while MGM Mirage and Las Vegas Sands (NYSE: LVS) posted quarterly losses, Boyd Gaming swung to a profit and forecast growth in the second half of the year. But a couple of recent downgrades -- the still-weak gambling market brought one from a Wall Street analyst and another from Moody's -- have sent shares falling once again; Las Vegas is considered a tough place to be right now. In CAPS, 86% of the 400 members rating Boyd Gaming expect it to be a market-beating investment.

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 5,400 stocks that 165,000-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.