5 STOCK IN A STAILSPIN

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5 Stocks in a Tailspin

By Dave Mock
March 5, 2009 | Comments (0)

Recs
5

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 in Gannett fell almost 24% Tuesday after S&P downgraded its credit rating to junk status.

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 130,000 CAPS members to make better decisions.

NOTE: the big signals in share price can sometimes signals can defects on a materials.

We'll use CAPS' handy stock screening tool to quickly zero in on companies that have been slashed by at least 30% in the past 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.

Company


CAPS Rating
(out of 5)


4-Week
Price Change

KB Home (NYSE: KBH)


*


(42.0%)

HSBC (NYSE: HBC)


*


(31.8%)

Goodyear Tire & Rubber (NYSE: GT)


**


(47.8%)

MannKind (Nasdaq: MNKD)


**


(45.7%)

InterDigital (Nasdaq: IDCC)


****


(30.5%)

Source: Motley Fool CAPS. Price return Feb. 6 through March 3.

KB Home
New-home builders like KB Home and Pulte Homes (NYSE: PHM) are competing with foreclosures and short sales, which continue to flood the market. KB Home has aggressively cut costs and recently introduced a new product line, giving buyers more options to tailor price to their budgets. KB Home sits on $1.13 billion in cash, which puts it in a better position than some others like Hovnanian, but not enough to earn high favor in CAPS -- only 39% of the 1,224 members rating KB Home expect it to beat the market.

HSBC
HSBC, Europe's largest bank, decided that the business in the U.S. isn't so good after all and announced plans to shut down its U.S. consumer lending unit, which was a big drag on profits last year. The move will cut 6,100 jobs out of the 35,000 employees it has in America. It also seeks to raise $17.7 billion in new capital through a rights issue, turning to investors rather than government aid. Rubbing more salt in the wound, the company cut its dividend and warned it could be reduced again. As such, only 66% of the 702 CAPS members rating HSBC have confidence that the company can beat the market.

Goodyear
The global slowdown has Goodyear experiencing lower sales, leading to a $330 million fourth-quarter loss, despite North American market share gains and higher tire prices. With major customers like GM and Chrylser in a wreck, Goodyear plans to cut more staff, reduce capital expenditures and sell noncore assets to weather the storm. It's also among many companies dealing with hefty pension-related charges. In CAPS, Goodyear gets a lukewarm reception, with 82% of the 407 members who weighed in rating it bullishly.

NOTE: the global slowdown has a good year experiencing lower sales, the north american market shares gains and higher tire price.

MannKind
Increased manufacturing costs for drugmaker MannKind's inhaled insulin candidate, Afresa, led to a fourth-quarter loss of $83.3 million. While it reported no revenue, the company had positive phase 3 results and plans to seek FDA marketing approval for the drug this year. Some CAPS members are unsure of the potential of an inhaled insulin product, though, after an unsuccessful attempt by Nektar Therapeutics and Pfizer (NYSE: PFE), leading to an overall thumbs-up percentage of only 75% of the 388 members rating MannKind in CAPS.

InterDigital
Since the lifeblood of technology developer InterDigital is patent licensing revenue, the $4 million drop in recurring patent royalties in the fourth quarter wasn't the surprise investors were looking for. Increased development expenses led to lower fourth-quarter profit, which missed analyst expectations. Many CAPS members remain bullish on the company's ability to sign deals and protect its base of patents from infringement, though, and 95% of the 1,014 members rating InterDigital think it will beat the market.

Ultimately, whether you believe a fall in any stock is warranted, your own research is more important than collective opinions. But 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 more than 5,300 stocks that 130,000-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.
Like this article? Get our best articles delivered direct to your inbox at no cost. Sign up for Foolwatch Weekly by entering your email below.

The Motley Fool Stock Advisor service looks for companies with strong management poised to beat the market over the long haul. InterDigital is one such company chosen by the service and recommended to subscribers. To see all the stocks that have helped Tom and David Gardner beat the market by 30 points on average, take a free 30-day trial.

Fool contributor Dave Mock habitually looks for silver linings in even the darkest of clouds. He owns shares of Pfizer, which is a former Income Investor recommendation and a current Inside Value selection. The Fool's disclosure policy is made of sugar and spice and everything nice.

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Related Tickers

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The Goodyear Tire & Rubber Company

CAPS Rating 2/5 Stars

$3.56

-0.34 (-8.72%)

Outperform335
[335 outperforms, 72 underperforms]

Underperform72
Rate This Stock

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