Individual stocks can surge 10%, 25%, or higher in a short time -- but they can fall just as far, just as fast. The recent 90% plunge in shares of investment bank Bear Stearns (NYSE: BSC) over the last week serves as one of the most prominent examples in decades that even the mightiest of companies can be almost completely wiped out in short order.  

Big drops in share price can signal material defects or new risk in a company, but at other times, they're simply pullbacks after a long run-up. Fortunately, we have Motley Fool CAPS -- a great resource to help understand the larger picture behind big price drops.

Is the sky falling?
CAPS contains more than just the crowd's opinions. Its best-performing investors' opinions count more in shaping each company's rating than the picks of their poorer-performing peers. This allows investors to use the collective wisdom of more than 89,000 CAPS investors -- and their respective track records -- to make better investing decisions.

To put this in practice, we'll screen for companies with a stock that has been slashed by at least 30% in the past month, a market cap of greater than $100 million, and a beta of less than 3. That'll keep us out of the mud filled with gyrating penny stocks.

Here's a sample of stocks our screen returned.


CAPS Rating
(out of 5)

Price Change

WellCare Health Plans (NYSE: WCG)



Titanium Metals (NYSE: TIE)






Washington Mutual (NYSE: WM)



National City (NYSE: NCC)



Return data is calculated as the difference between the closing price on Feb. 15 and the closing price on March 20, as per MSN Money's screen. Star ranking from CAPS. Data as of March 20.

Let's add a little color to recent circumstances and find out why some of these stocks have been beaten so badly.

Banking on debt
"Bank" is the new four-letter word these days as more and more financial institutions reveal their exposure to bad debt. India's ICICI Bank is one of the latest to come under investor and regulatory scrutiny for its exposure to subprime loans.

Shares in ICICI Bank had nearly doubled in the past year before mounting credit concerns going into 2008 wiped out those gains. Three weeks ago, ICICI blamed the widening of credit spreads for a $263 million paper loss in market value of its credit derivatives and fixed-income portfolio. But the rapidly growing company emphasized once again that it has no significant exposure to subprime loans.

Like competitor HDFC Bank (NYSE: HDB), ICICI is well diversified in retail and business banking services including investment banking, credit cards, and insurance. Both companies have massive growth opportunities laid out before them and have been some of India's best-performing stocks.

But getting shares of ICICI Bank at a reasonable valuation has been tough -- until now. While the loss of nearly 40% of the stock's value has investors a little shell-shocked, ICICI was trading at a premium before. With a forward earnings multiple of roughly 17, the stock is more in line with projected earnings growth that hovers near 20% annually.

And even with the risks facing the global banking sector, 97% of the 694 CAPS players rating the company say it will outpace the S&P going forward.

Checking vital signs
It has been quite a year for WellCare investors. After seeing shares plummet more than 80% after the federal government raided the company in a clandestine investigation last October, the stock more than doubled off its lows. The underlying business still showed positive signs of growth as concerns over the depth of the investigation waned.

But in the past several weeks, the board has cleaned house in upper management, namely, its CEO, CFO, and general counsel. The company also delayed its 10-K filing at the same time several health-insurance providers were showing signs of sickness with warnings about future earnings.

Many CAPS investors see WellCare as a beaten down stock opportunity, however; they say the cheap price of shares and ample cash flow outweigh the risk of the fraud investigation. Indeed, 363 of the 390 investors rating the company remain bullish.

Ultimately, whether you believe the reasoning behind a fall in any stock, your own research is more important than collective opinions. Still, CAPS' collective opinions can quickly focus an individual's due diligence, and even point out potential pitfalls you may not have seen.

Add your take on these or any of the 5,500 stocks that 89,000-plus investors 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.

The Motley Fool Global Gains service scours the world for companies like HDFC Bank that show tremendous potential for servicing booming global markets. Check all the stocks in this market-beating service with a free, 30 day trial.  

Fool contributor Dave Mock habitually looks for silver linings in even the darkest of clouds. He owns no shares of companies mentioned here. Dave is the author of The Qualcomm Equation. Washington Mutual and National City are Income Investor recommendations. HDFC is a Global Gains pick. The Fool's disclosure policy is made of sugar and spice and everything nice.