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, Elan's (NYSE:ELN) shares fell 40% and 50% on two separate days last week after news of significant setbacks for two of its drugs.
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 110,000 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 25% in the last four weeks, and which have a market cap greater than $100 million and a beta of less than 3.
Here's a sample of stocks our CAPS screen returned:
|
Company |
CAPS Rating
|
4-Week |
|---|---|---|
|
Sirius XM Radio (NASDAQ:SIRI) |
** |
(34.7%) |
|
Agnico-Eagle Mines (NYSE:AEM) |
*** |
(31.0%) |
|
Akamai Technologies (NASDAQ:AKAM) |
**** |
(25.2%) |
|
Hercules Offshore (NASDAQ:HERO) |
***** |
(34.8%) |
|
Chesapeake Energy (NYSE:CHK) |
***** |
(28.8%) |
Source: Motley Fool CAPS. Price return from July 11 through Aug. 4.
Sirius XM Radio
After smelling the finish line for far too long, Sirius has finally pulled off the merger with XM, only to see its share price fall to its lowest in years. Its CEO took the opportunity to snap up 2 million more shares, after paying much higher prices before. Absorbing XM's user base triples the number of subscribers for the company, giving it much greater scale, but it also presents new challenges. Even with the new low stock price, only 80% of the 4,879 CAPS members rating Sirius XM Radio expect it to outperform the market.
Agnico-Eagle Mines
Gold miner Agnico-Eagle reported a 78% drop in second-quarter earnings from a year ago, due in large part to its zinc prices. Delays in equipment delivery and rising expenses have also caused delays to two upcoming mines, grounding the stock in the process. The macro-economic picture hasn't helped either -- Agnico-Eagle and many peers have seen shares pull back from March highs when gold topped $1,000 per ounce. But a large majority -- 93% of the 934 CAPS members rating Agnico-Eagle -- believe Agnico-Eagle is no dog and will beat the market going forward.
Akamai
Web data delivery solution provider Akamai reduced its revenue and earnings guidance for 2008, leaving some investors wondering if Akamai can overcome its slowing growth. The company does have big technology advantages over competitors and it holds a strong balance sheet with adequate cash and long-term securities to meet expansion and R&D investment needs. While the balance of the fiscal year may not be as peachy as originally envisioned, 2,132 of the 2,236 CAPS members rating Akamai remain bullish.
Hercules Offshore
Although revenue nearly tripled for offshore driller Hercules, its earnings didn't meet expectations and fell for the second quarter compared to last year. The second quarter was an improvement from the first, though, and the company hopes a new CEO can make some magic and get utilization up on its shallow-water rigs. With the activity in the Gulf expected to pick up this year, 98% of the 1,118 CAPS members rating Hercules expect it to outperform the market.
Chesapeake Energy
Shares of Chesapeake and other energy companies like XTO Energy (NYSE:XTO) have taken a hit lately as oil and natural gas prices have fallen. Chesapeake also posted a $1.6 billion second-quarter net loss thanks to a non-cash charge from its hedging activities on the prices of natural gas and oil and interest rates. It has been spending heavily on its Haynesville and Marcelus Shale gas plays. But if the Haynesville Shale turns out to be the biggest-ever gas find -- as Chesapeake predicts -- the upside could be huge. A strong majority -- more than 97% of the 4,970 CAPS members rating Chesapeake -- expect it to be a market-beating stock going forward.
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 5,500 stocks that 110,000-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.
