Get Ready for the Fall

"The bigger they are, the harder they fall."

This 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 terror (whatever you do, don't look down).

On Motley Fool CAPS, thousands of investors just like you are watching these same companies and voting their gut, waiting to see 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 the smartest investors out there pan 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 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 74,000 (and counting) stock gurus have to say about them?

One Year
Ago Today

Currently
Fetching

CAPS
Rating

Procter & Gamble (NYSE:PG)

$62.54

$73.19

*****

Coca-Cola  (NYSE:KO)

$46.02

$62.62

****

Merck (NYSE:MRK)

$43.64

$58.38

****

France Telecom  (NYSE:FTE)

$24.72

$38.27

****

VeriSign (NASDAQ:VRSN)

$23.34

$36.06

***

Ventana Medical  (NASDAQ:VMSI)

$43.26

$90.08

***

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. One year ago and current pricing provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Everybody loves a winner
The old saying holds true again today. None of our seven companies, newly arrived on the 52-week high list, was rated an underperformer on CAPS. To the contrary, our community of lay and professional investors thinks that the majority of these stocks -- already at their highs for the year -- are well-positioned to keep on outperforming the S&P 500.

Build-a-bear, anyone?
With optimism prevailing on most of these stocks, and not a one of them scoring below-average on CAPS, I'm hesitant to suggest that any of them looks "ready for the fall" this week. But we can highlight a few negative sentiments that could -- if they play out -- foretell a fall. Surveying our top three stocks on today's list, here's a sample of the most cogent bear theses for each:

  • Procter & Gamble: muck12 argues that P&G faces twin threats: from competition from private label products, and from pricing pressure from megabuyer Wal-Mart (NYSE: WMT  ) . In each case, muck12 thinks P&G will see margin compression going forward.
  • Coke: While admitting that Coke has a "great brand," CAPS All-Star alopex fears that "eventually the administration will move aggressively on the drinking problem of the US youth (and adults). Its not just high fructose corn syrup and caffeine (thus the 'diet' products), but also artificial sweeteners to catch bad press at some point in time, and phosphoric acid (osteoporosis, tooth decay). ... This will be the next health war after the smoking one is won."
  • Merck: There was much joy in Mudville when mighty Merck struck a deal to settle its Vioxx lawsuits. But angusthermopylae argues that Merck isn't home-free yet:

Gardasil, the HPV vaccine that Texas and the UK (as well as others) want to make mostly mandatory ... comprised over $730 million in Merck's vaccine sales in the first six months of the year. ... There are at least 2.028 million people who have received the vaccine. ... That's a lot of customers ... or lawsuits. Do a news search of "Gardasil" and you will start to find stories dangerous and deadly side effects.
--One UK service reports over 1,700 cases of severe side effects.
--The same article reports hundreds of anecdotal stories of miscarriages.
--Critics say that the vaccine has not been through anything remotely like a full and rigorous testing product like it should be, and that the true long-term side effects are unknown.

To reiterate -- on balance, CAPS investors are confident that each of these three stocks will beat the market over the long-term. But if the majority is proven wrong, remember the Foolish words of the minority quoted above. They'll be the ones whispering: "We told you so."


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