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 media conglomerate Tribune fell 94% when it shocked the market with a bankruptcy filing.

Big drops in share price can sometimes signal material defects or new risks. But at other times, they may simply be pullbacks due to broader market fears. 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 120,000 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.

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


CAPS Rating
(out of 5)

Price Change

Tessera Technologies (NASDAQ:TSRA)



Alpha Natural Resources (NYSE:ANR)



Micron Technology (NYSE:MU)



Genco Shipping & Trading (NYSE:GNK)



Transocean (NYSE:RIG)



Source: Motley Fool CAPS. Price return from Nov. 14, 2008, through Dec. 8, 2008.

Tessera Technologies
Tessera's stock recently took its second major plunge this year when an International Trade Commission judge determined Tessera's patents were not infringed by several companies, including Motorola and Qualcomm (NASDAQ:QCOM). The company will bear the litigation fees, but hadn't included any potential awards or settlements in its forecasts. Still, investors were hoping a much more positive outcome would boost future royalties, while 90% of the 258 CAPS members rating Tessera Technologies today expect it to outperform the market.

Alpha Natural Resources
A deteriorating steel market is causing Alpha's customers to defer orders, leading the company to lower its production estimates and earnings guidance for the year. On the positive side, about $60 million in net proceeds from the canceled deal with highly rated Cliffs Natural Resources will help offset charges for a mine closure and hedging losses.

Some CAPS members recognize the short-term uncertainty, but also like Alpha's future potential. Overall, more than 94% of the 617 CAPS members rating Alpha Natural Resources expect it to beat the market.

Micron Technology
Memory-chip makers Micron and competitor SanDisk have each lost a massive amount of value this year in a bleak memory market that sorely needs some consolidation. As declining chip prices eat into profits, Micron is trying to cut costs, including idling production for 12 days and announcing layoffs of 15% of its workforce last month. The future isn't looking much brighter, as the Semiconductor Industry Association recently said it expects worldwide chip sales to fall in 2009. As such, some CAPS investors are hedging on Micron, with only 86% of the 611 members rating the company bullish.

Genco Shipping
Drybulk shipping is another sector that has fallen off a cliff, with Genco and DryShips having shed more than 75% of their value over the past year. Drybulk shipping rates have dropped more than 90% since their summer highs, and the low valuations have some dry shippers rumored to be considering going private. But many CAPS members are bullish on Genco's outlook as it generates healthy margins on long-term contracts. More than 95% of the 797 CAPS members rating Genco expect it to outperform the market.

Transocean's earnings rose 13.7% in the third quarter, and higher dayrates increased margins to 43%. It also recently announced a $1.2 billion ultra-deepwater drilling contract with ExxonMobil (NYSE:XOM), but sliding oil prices kept it from meeting analyst expectations and have helped send the stock to fire-sale levels. Still, some investors see energy prices eventually rising again as potential project delays cause tighter supply. A strong contingent of CAPS members are behind Transocean, with more than 97% of the 4,834 members rating the company expecting it to beat the S&P.

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 point out potential pitfalls you may not have seen.

Add your take on these or any of the nearly 5,400 stocks that 120,000-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.

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.