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 Beazer Homes sank 12% on Wednesday after it said it would issue 18 million shares of common stock and $50 million of convertible subordinated notes, a dilution to the roughly 40 million shares already outstanding.      

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. 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 145,000 CAPS members to make better decisions.

We'll use CAPS' handy stock screening tool to quickly zero in on companies with three factors: their prices have fallen at least 10% in the past four weeks, and they have a market cap greater than $100 million and a beta less than 3.

Company

CAPS Rating
(out of 5)

4-Week
Price Change

OncoGenex Pharmaceuticals (NASDAQ:OGXI)

*

(31.9%)

AnnTaylor Stores (NYSE:ANN)

*

(17.1%)

Jackson Hewitt Tax Service (NYSE:JTX)

***

(14.9%)

Source: Motley Fool CAPS.
Price return Dec. 11 through Jan. 5.

OncoGenex Pharmaceuticals
OncoGenex's lead drug candidate, OGX-011, is being studied in combination with chemotherapy to treat several different kinds of cancer, and the company recently scored a deal with Teva Pharmaceutical for Teva to pay for all of the development costs with a $60 million upfront payment, and up to $370 million more in possible milestones.

But investors slammed the company's shares, as many expected better terms and a more lucrative payment structure. OncoGenex has to pay its partner, Isis Pharmaceuticals (NASDAQ:ISIS), $10 million upfront and also has to fork over 30% of its milestone and other payments, leaving some investors thinking that the company nearly gave the deal away and isn't negotiating from a position of strength.

Just 21% of the 124 CAPS members rating OncoGenex Pharmaceuticals expect it to outperform the market, which is a pretty abysmal vote of confidence.      

AnnTaylor
Although AnnTaylor reported in November that it swung to a profit in the third quarter, the women's clothing retailer also reported falling same-store sales and forecast weak holiday sales. According to overall figures by MasterCard (NYSE:MA) Advisors' SpendingPulse, shoppers passed over women's clothing racks during the holiday season, with women's apparel sales falling 2.8% compared with a year ago. In addition, one analyst recently downgraded the stock based on a forecast of increased cost pressures in the second half of the year, echoing the bearish sentiment toward the stock on CAPS.

Only about 62% of the 253 members rating AnnTaylor see it beating the broader market in the future.  

Jackson Hewitt
It's a fierce battle in the tax preparation business between Jackson Hewitt, direct competitors like H&R Block (NYSE:HRB), and tax software makers like Intuit. Jackson Hewitt is using every edge it can, like putting more kiosks in Wal-Mart Stores (NYSE:WMT) than last year and building its online presence by teaming with and leveraging the brand of walmart.com. But upon hearing that its banking partner would be unable to provide money for tax refund loans, investors quickly refunded shares, sending the stock down.

Some CAPS members remain optimistic that it can find a replacement source of funds, but without it, the company could see a serious blow to its business. In CAPS, 90% of the 294 members rating Jackson Hewitt remain bullish on the stock.                                     

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 145,000-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.

The Motley Fool Inside Value team looks for beaten down stocks that are selling at bargain prices well below their intrinsic value. To see the full list of cheap companies the service is recommending today, take 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. Wal-Mart Stores is an Inside Value pick. The Fool's disclosure policy is made of sugar and spice and everything nice.