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, Nasdaq.com 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 'em. For my money, though, the best course of action is to use the "52 week high" 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 high" list at Nasdaq.com. What does our panel of more than 29,000 stock gurus (and counting) have to say about them?

Five stars = highest possible CAPS rating; one star = lowest. Companies are selected from the "NASDAQ 52 Week High" list published on Nasdaq.com on the Saturday following close of trading last week. 52-week high and current pricing provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Everybody loves a winner
When stocks soar on the wings of success, bears become rare. So it's no surprise that investors love most of the stocks on today's list, with the sole exception being hamburger hawker Burger King. More than half of investors polled find the stock overpriced. More importantly, among our best players -- the CAPS All-Stars -- nearly two out of three rate the stock a likely underperformer. Why? Let's find out.

The bear case on Burger King
Burger King bears take an almost personal dislike to this stock. Just listen to what our All-Stars have to say:

• CAPS prodigy pencils2 acidly observes: "When you go public, it shouldn't be because you are burning cash, racking up debt, and will desperately need money. I don't know who BKC was trying to trick, but I don't think it is going to work."
• EV38 writes: "Oh man! A declining company in a declining industry with a 55 PE. And I thought Wendy's was bad! ... This is so deserving of being one of those value plays with a P/E of 10 ... unfortunately for the longs that implies a stock price of $3.70!"

But perhaps the best and most reasoned analysis comes from a player who's just shy of All-Star status. Explains jack21222: "Forward earnings estimates are around $1.20 per share [this] fiscal year. McDonalds trades at around a P/E of 16 to 17, and McDonalds is the market leader, and pays a dividend. Burger King is still in rebound mode, is trailing McDonalds by a good distance, and pays no dividend. I'd say Burger King warrants a P/E ... about equal to its expected growth rate, no premium over. ... Therefore, the price per share of Burger King [this] year should be sitting around $15.50- $16.50 per share."

Time to chime in
Pretty grim, eh? The most forgiving of bears argues that Burger King is already about 60% overpriced. The less forgiving opine that the stock is overpriced by at least twice (based on trailing earnings of $0.76 per share).

Do the King's shares merit this princely valuation? Don't be shy -- tell us why! Or if you agree with our more pessimistic investors, feel free to pile on in a fit of journalistic regicide. As you can see, whatever you write, Burger King has almost certainly heard worse.

Fool contributor Rich Smith 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 No. 1,802 out of more than 29,000 raters. The Fool has a disclosure policy.