3 Stocks in a Tailspin

Individual stocks can rise 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 Patriot Coal fell more than 13% last Thursday after a Citigroup analyst downgraded the stock, along with other coal companies, because of concerns about weak demand.

Big drops in a 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 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 Dec. 31 through Jan. 26.

First Solar
First Solar has had a rough start to the year because investors are concerned about shrinking European solar subsidies. France recently made cuts to its solar feed-in tariffs, and Italy will likely join it. But Germany's proposed cuts that may come sooner than expected could be the worst blow to First Solar. While other solar companies like Yingli Green Energy and Suntech Power (NYSE:STP) get a large percentage of their sales from Germany, First Solar is one of the most exposed to the market, with about 60% to 70% of its sales there last year. CAPS members give First Solar only two out of five stars, with 81% of the 3,735 members rating the company expecting it to outperform the market.   

Cray
Many CAPS members like Cray's competitive position in the supercomputer race, where late last year, Cray's Jaguar system finally became the world's fastest supercomputer, a crown that IBM (NYSE:IBM) had held for years. Although Cray expects growth and profitability in 2010, shares have declined recently after it lowered its 2009 revenue guidance and said it may take a loss from operations for the year because of a delayed milestone payment and contract modification from a U.S. government agency. Today, 82% of the 130 CAPS members rating Cray expect it to beat the broader market.

Alcoa
Alcoa had reached new 52-week highs recently before leading off earnings for metals companies including Rio Tinto (NYSE:RTP) and Century Aluminum (NASDAQ:CENX) with a quarterly report that didn't meet Wall Street's expectations. The company's massive restructuring and cost cuts didn't help it turn a profit for the fourth quarter or full year, but did help it pay down a large amount of debt compared with a year ago, helping to boost its liquidity. Alcoa expects the cuts will position it for growth in the years ahead, and many CAPS members are bullish on the long-term outlook for aluminum, with 93% of the 2,816 members rating the company giving it the thumbs-up.                                                          

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 more than 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.