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 Dow Chemical (NYSE:DOW) dropped 19% on Monday after the Kuwaiti government pulled the plug on its $17 billion joint venture deal.

Big drops in share price can sometimes signal material defects or new risks. But at other times, they're simply pullbacks after a long run-up. 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 125,000 CAPS members to make better decisions.

We'll use CAPS' handy stock screening tool to quickly zero in on companies that have been slashed by at least 20% in the last four weeks, and which have a market cap greater than $100 million and a beta of less than 3. If you want to run this screen for yourself, please do -- just keep in mind that the results will update with the market.

Here's a sample of stocks our CAPS screen returned:


CAPS Rating
(out of 5)

Price Change




Royal Bank of Scotland (NYSE:RBS)



FirstEnergy (NYSE:FE)



Allied Irish Banks (NYSE:AIB)



Schlumberger (NYSE:SLB)



Source: Motley Fool CAPS. Price return from Nov. 28 through Dec. 26.

YRC Worldwide
U.S. trucking company YRC has had a rough 2008. It's been hit hard by the recession, with lower freight volumes forcing many companies to cut prices to attract customers. YRC's troubles are exacerbated by its struggle with debt, including a debt tender that was put on hold due to ongoing wage reduction talks with union workers. But with more than $250 million in cash, more than a few investors see some upside in the beaten-down trucker. In CAPS, 84% of the 272 members rating YRC Worldwide expect it to outperform the market.

Royal Bank of Scotland
RBS' joint takeover of ABN Amro brought a mess of toxic mortgage assets, causing billions in writedowns and leading the bank to post its first loss in 40 years. To add to the $29 billion the British government provided in November, the bank is working on selling its insurance divisions, which are profitable with positive cash flows. Some CAPS members see the bank as too big to fail now that the government owns it, and see brighter days ahead. But not everyone is convinced, as 10% of the 341 CAPS members rating Royal Bank of Scotland see it lagging the broader market.

Electricity provider FirstEnergy is currently in a dispute with Ohio state regulators over electricity rates, which could end up in court. The company recently rejected the Utilities Commission rate plan that set generation prices far below what the company wanted and spooked investors. Many investors have looked to utility stocks for more stable returns in bad economic times and FirstEnergy continues to maintain a dividend that is currently yielding more than 4%. Nearly 94% of the 229 CAPS members rating FirstEnergy expect it to outperform the market.

Allied Irish Banks
Allied Irish Banks' shares have almost been wiped out over the past year and it's among the top three Irish banks that are receiving bailout money from the Irish government. The bank plans to raise even more money from shareholders, which would raise its Tier 1 capital ratio. While some investors doubt it will survive, many are tempted by an insanely low valuation and opportunity for long-term growth. The vast majority of CAPS members rating AIB are sold on the stock, with 97% of them voting the way of the bull.

Like Transocean, oil services company Schlumberger hit a 52-week low last week. Most CAPS members have a bullish stance on the company, while Wall Street analysts have a different opinion. Some analysts predict flat spending in exploration and production for 2009, which could create a huge challenge for oil services companies like Schlumberger, Halliburton (NYSE:HAL), and Baker Hughes. While energy in 2009 is anybody's guess, more than 97% of the 2,567 CAPS members rating Schlumberger remain bullish.

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.

Add your take on these or any of the nearly 5,400 stocks that 125,000-plus members have covered in Motley Fool CAPS.

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.