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 with 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 65,000 stock gurus (and counting) have to say about them?

One Year Ago Today

Currently Fetching

CAPS Rating (out of 5)

EMC (NYSE:EMC)

$12.69

$22.81

*****

FLIR Systems  (NASDAQ:FLIR)

$28.21

$60.07

*****

XTO Energy  (NYSE:XTO)

$42.41

$65.50

*****

Apollo Group (NASDAQ:APOL)

$49.67

$66.13

****

Electronic Arts (NASDAQ:ERTS)

$57.00

$61.40

***

Hilton Hotels  (NYSE:HLT)

$28.61

$47.17

**

Companies are selected from the "NASDAQ 52 Week High" list published on Nasdaq.com on the Saturday following close of trading last week. Year-ago 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 comes as no surprise that most of the stocks on today's list earn above-average ratings from investors. What is surprising is the one stock that gets panned: Hilton Hotels. I mean, does my memory deceive me, or didn't Blackstone (NYSE: BX  ) already agree to buy this company for $47.50 per share, and target closing before the end of this year?

Either investors expect the Dow to continue hitting new highs and outperform the 1% gap remaining between Hilton's offer and today's price, or else they see trouble ahead for this buyout. To get inside the head of investors and find out exactly why they expect Hilton to underperform the S&P 500, let's take a short stroll through...

The bear case against Hilton Hotels

  • CAPS All-Star sallgeud takes the over on this bet. Writing back in July, sallgeud argued that with the "final price ... now baked in at 47.50 ... we know how far it has to go from here. ... I'll take the S&P on this one." So far, that's been a losing bet, but with the pick still active, sallgeud is letting the money ride.
  • And if the deal with Blackstone falls through? ptacdr gives us some perspective on that prospect: "Look at the recent quarterly earnings, and bottom line. HLT is running negative numbers compared to last year. I work in the hotel industry, and I have seen this many times. If the shares continue to go up, everyone stays flush. The correction will come when smaller investors start to see the decline in the bottom line. By then, the largest [investors] are already out, with their locked in profits. The industry is overbuilt with rooms, and HLT has run out of new brands to offer."

Personally, I'm leery of betting against a signed contact. Yes, I know all about the problems with the Harman and Sallie Mae buyouts. Still, Blackstone is flush with IPO cash, and if there's a liquidity crunch in debt, this now-public shop can always tap a stock market, still hitting record highs, if it needs cash to consummate its marriage to Hilton. In short, the negative CAPS sentiment notwithstanding, I don't see Hilton as a stock ready to fall.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Hilton -- or even what other CAPS players are saying. We also want to hear your thoughts on this, or any other company on today's list. If you've got an opinion, we've got a place to voice it.

Motley Fool CAPS: It's fun, it's free, and it just might make you famous.


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