Get Ready for the Fall?

"The bigger they are, the harder they fall." This old saying sums up the worst nightmare of every homeowner, every gold buyer, and every investor in today's market. Dare ye buy at the top?

Every day, MSN Money publishes a list of the market's top stocks -- the companies whose shares have just hit their highest intraday price of any time in the past 52 weeks. Every day, investors read this list and tremble -- some with greed (big mo', baby!), and others in pure, unmitigated, acrophobic terror (whatever you do, don't look down).

Over on Motley Fool CAPS, thousands of investors just like you are watching these same companies and voting their gut on whether they'll keep rising or stumble and fall. Usually, the ratings wax optimistic as stocks hit new highs -- because everyone loves a winner. But what do you make of it when some of the smartest investors out there are panning a hot stock?

You could heed them. You could ignore them. You could take the stock tickers and construct anagrams from them. For my money, though, the best course of action is to use the "52-week highs" list as just a starting point for further research. After all, stocks can go up for many reasons, and it's up to you to decide how worthy those reasons are. But thanks to Motley Fool CAPS, now you don't have to make the decision alone.

With that said, let's meet today's list of contenders, drawn from the latest "52-week highs" list at MSN Money. What does our panel of more than 22,000 stock gurus (and counting) have to say about them?

One year ago today

Currently fetching

CAPS rating (out of five)

Sears Holdings (Nasdaq: SHLD  )

$118.89

$181.47

****

CBOT Holdings (NYSE: BOT  )

$106.45

$171.25

***

Alexandria Real Estate (NYSE: ARE  )

$83.19

$112.08

**

Essex Property Trust (NYSE: ESS  )

$96.14

$145.00

**

Cigna (NYSE: CI  )

$123.52

$137.99

**

Alexander's (NYSE: ALX  )

$237.75

$465.00

*

Companies are selected from the "New 52-Week Highs" list published on MSN Money on the Saturday following close of trading last week. CAPS ratings from Motley Fool CAPS.

Where's the love?
Around the globe, Cupid's set to let loose his arrows on Wednesday. On Wall Street in particular, affection abounds for stocks hitting their 52-week highs. But on CAPS, the love buzz fades rapidly as we move down the list. Sears starts strong with four stars. But move just two slots down, and you're already wading in the swampy waters of one- and two-star stocks -- expected underperformers all.

What's Sears got that Alexander's hasn't got? Perhaps the most striking thing -- to this Fool's mind, at least -- is Sears' ability to inspire CAPS players to become CAPS writers. With Sears, CAPS members don't just rate the stock an "outperformer" and move on; they linger a moment or three and pen a few lines on why they love the stock. More than 900 investors have rated Sears over the past few months, and more than 200 of them have prepared "pitches" explaining their ratings.

More important to you, the reader of these pitches, is that fully 57 of them come from "All-Stars" -- the top 20% of CAPS investors. Here are a few of the better comments you'll find:

  • gameguru writes: "Sears Holding is the kind of investment vehicle I love -- solid cash returns in the hands of a smart manager to redeploy the capital for you. I conservatively value the current business at about $200/share, but that fails to consider any potential for future deals. My guess is that in 20 years, no one will remember K-Mart, but Lampert's holding company will still be around and earning market-beating returns on investment."
  • aj350 expresses affection for Sears in the universal language of mathematics: "SHLD still looks like its undervalued, adjusted FCF looks like it will hit 2.7-2.8 billion this year. (adjusted because I know eddie will fix working capital volatility) giving a EV / FCF of 10."
  • And for any investors wishing they had been around to see -- and invest in -- the beginning of Berkshire Hathaway, heed the words of OConnorCapital: "Eddie Lampert ... a stable business in which produces incredible amounts of free cash flow ... and an intelligent asset allocation strategy in place, SHLD is a patient long term investors dream. There are very few, if any, people I would rather have allocating capital for me over the next 10-20 years."

But what do you think? Is Eddie Lampert Warren Buffett, reincarnated before he's been de-incarnated? Come on over to CAPS and give us your two cents. It doesn't cost a dime to play -- and if you're right, and can write, it just might make you famous.

Fool contributor Rich Smith was personally challenged to work the phrase "love buzz" into a column today. He does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked 43 out of more than 22,000 raters. Berkshire Hathaway is a Motley Fool Inside Value choice. The Fool's disclosure policy never stumbles, never falls.


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