3 Stocks in a Tailspin

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 casino operator Isle of Capri Casinos (NASDAQ:ISLE) fell 15% one day last week after its first-quarter earnings came in far below analyst estimates.

Big drops in 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 140,000 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.

Source: Motley Fool CAPS. Price return Aug. 7 through Sept. 1.

Advanced Battery Technologies
Stock in Advanced Battery Technologies has been easing back following a big run over recent months. Its bottom line shrunk in the first quarter, and a second-quarter profit that jumped 71% was a little hollow -- its $8 million in earnings stems from a $9.9 million gain on the purchase of Wuxi Zhongqiang Autocycle Co. Excluding one-time gains, net income would have come in at far less than the $4.7 million it earned in the same quarter last year. And as a result of lower-margin electric vehicle sales, gross margin dropped to 45.8% from 50.8% a year ago. 

In CAPS, a lackluster 80% of the 617 members rating Advanced Battery Technologies are bullish.

Sears Holdings
Though department-store retailer J.C. Penney (NYSE:JCP) was able to impress many by simply breaking even in the second quarter, Sears took the brunt of the new reality in retail and posted a surprise loss. The company faces a $1.7 billion pension shortfall, resulting in charge-offs in the first two quarters of this year. Store closings have added even more to the total. Both its Sears and Kmart stores continue to underperform rivals such as Wal-Mart Stores (NYSE:WMT), with same-store sales falling much further than their competitors'. Much of Sears Holdings' previous liquidity concerns have faded; it ended the quarter with nearly $1.3 billion in cash, but few CAPS members expect those running the company to turn its stores into worthy competition anytime soon. 

Accordingly, only 73% of the 2,170 CAPS members rating Sears Holdings expect it to outperform the market.

United States Natural Gas Fund
Many CAPS members have a long-term bullish outlook on natural gas. Producers like Chesapeake Energy (NYSE:CHK) have climbed high from their 52-week lows. But with natural gas prices continuing to plummet, some investors see little reason to own exchange-traded fund United States Natural Gas Fund, which is currently trading at a significant premium to its net asset value. It recently stopped issuing new shares, and it faces regulatory risk in Washington, as the Commodity Futures Trading Commission looks into the effects speculators have on commodities prices.

Even with all the risks, many CAPS members are betting that the fund has bottomed; 96% of the 1,285 members rating the ETF expect it to beat the broader market.

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 you may not have seen.

Add your take on these or any of the 5,300 stocks that 140,000-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.