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 Arena Pharmaceuticals fell 40% Tuesday after the Food and Drug Administration released briefs ahead of an advisory panel meeting that again raised concerns about safety and low efficacy for its obesity drug lorcaserin.
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 170,000 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 three.
Company |
CAPS Rating
|
4-Week |
---|---|---|
China Green Agriculture |
**** |
(28.6%) |
Gulf Resources |
**** |
(26.4%) |
Shanda Games |
**** |
(24.5%) |
Source: Motley Fool CAPS. Price return Aug. 20 through Sept. 14.
China Green Agriculture
China Green Agriculture joined fellow agriculture peers China Agritech
Gulf Resources
Chinese bromine producer Gulf Resources is trying to right itself from the downward tailspin its shares have been in since the beginning of the year. The company recently announced that it's raising its full-year guidance, expecting the strong demand for bromine it saw in the second quarter to continue. Robust prices for the chemical are leading to renegotiated sales contracts with its customers. Many CAPS members note Gulf's strong balance sheet and healthy position in a growing industry -- just a few of the qualities that give roughly 95% of the 354 members rating the company confidence that it will outpace the market averages.
Shanda Games
Shanda Interactive
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 170,000-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.
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