3 Stocks in a Tailspin

Individual stocks can rise 10%, 25%, or even more in a short period of time. And they can fall just as far, just as quickly. For example, shares of PMI Group, which have brought huge gains since the market's March low, fell 17% after Goldman Sachs initiated coverage on the mortgage insurance sector with a sell rating on the stock.

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 with three factors: Their prices have fallen at least 20% in the last 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 Dec. 28 through Jan. 22.

NutriSystem
NutriSystem has been busy expanding its presence in retail stores like Wal-Mart Stores, Sam's Club, and Walgreen's (NYSE:WAG), but some CAPS members are concerned about its growth strategy over the long haul. A $5 million impairment charge related to its purchase of food delivery business Nu-Kitchen is expected to be a drag on fourth-quarter earnings, and its rating in CAPS recently dropped from three stars to two because some investors think shares may have shot up too fast late last year. At this point, 89% of the 912 CAPS members rating NutriSystem expect it to outperform the market.

Con-way
While shipper FedEx (NYSE:FDX) recently reported some improvement in shipping volumes, and rival and turnaround candidate UPS (NYSE:UPS) raised its fourth-quarter guidance, trucking company Con-way's shares took a hit after a JPMorgan Chase analyst downgraded the stock, citing competition and overcapacity in the industry.

The company's third-quarter profit fell by nearly two-thirds because of weak demand and excess capacity -- which all adds up to pricing pressure -- and some investors are concerned about the increasing earnings pressure Con-way and peers like YRC Worldwide will face. Some investors see potential for truckers in an improving economy, but Con-way earns just a two-star rating in CAPS, with only 76% of the 110 CAPS members rating the stock expecting it to beat the broader market.

MercadoLibre
MercadoLibre, an e-commerce company based in Argentina that's often described as a Latin American eBay (NASDAQ:EBAY) -- has put up big growth numbers in recent quarters. But despite the company's long-term growth potential in an emerging market and the opportunity to tap an increasing number of Internet users, some CAPS members think the stock was overvalued after huge gains last year -- gains that insiders have recently taken advantage of. The recent devaluation of Venezuela's currency -- which a JPMorgan analyst had predicted while downgrading the stock only a week before -- has also made many investors afraid and put some downward pressure on shares. Still, 91% of the 822 CAPS members rating MercadoLibre expect it to outperform the 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 nearly 5,400 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.