Get Ready for the Fall

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"The bigger they are, the harder they fall." It's the worst nightmare of every investor in today's market -- buying a hot stock just before it takes a nosedive.

Every day, MSN Money publishes a list of stocks whose shares have just hit new 52-week highs. And every day, investors read the list and tremble -- some with greed, others with terror. In our Motley Fool CAPS investing community, these top stocks usually enjoy favorable ratings, because everyone loves a winner. But what should you do when some of CAPS' smartest investors pan one of these hot stocks?

For starters, consider using the "52 week high" list as a starting point for further research. Stocks can rise for many reasons, but a little help from Motley Fool CAPS can make it easier to figure out how worthy those reasons are. Let's see what the more than 115,000 stock gurus (and counting) in CAPS have to say about the list's latest contenders:

	One Year Ago Today	Recent Price	CAPS Rating (5 max):
Orbital Sciences  (NYSE: ORB)	$21.58	$27.89	****
Marsh & McLennan  (NYSE: MMC)	$26.45	$26.45	****
CV Therapeutics (Nasdaq: CVTX)	$10.23	$11.03	****
Amgen (Nasdaq: AMGN)	$50.08	$65.06	****
Parlux Fragrances  (Nasdaq: PARL)	$3.36	$6.49	*

Five stars = highest possible CAPS rating; one star = lowest. Companies are selected from the "New 52-Week Highs" list published on MSN Money on the Saturday following close of trading last week. One-year-ago and recent prices 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 to find this week's list largely infused with high-quality, four-star stocks (three of which are, in fact, Motley Fool newsletter recommendations.) What is surprising is that we're also catching a whiff of something more lowbrow. Is someone here wearing "Paris Hilton"?

Indeed someone is: Parlux Fragrances, which manufactures the perfume. Without further explanation, let's move right on to examining ...

The bear case against Parlux Fragrances

• NetscribeConsGds introduced us to Parlux early last year: "Parlux Fragrances is engaged in the creation, design, manufacture, distribution and sale of prestige fragrances and beauty related products, marketed primarily through specialty stores, national department stores and perfumeries on a worldwide basis." (Including, to no one's surprise, both Bon-Ton and J.C. Penney -- while Nordstrom (NYSE: JWN) and Saks (NYSE: SKS) apparently took a pass.) "The company holds licenses to manufacture and distribute watches, cosmetics and handbags, purses and other small leather goods, and sunglasses as well as to manufacture and sell fragrances."
• AW2580 managed to state the bear case on this one early last year in six words flat: "No cash flow, too much debt."
• And CAPS All-Star TheGreatSatan dispatches Parlux with six more: "Parlux will launch Queen Latifah fragrance."

Ouch. But there's no need to resort to ad hominems (homina? hominae?), TheGreatSatan. Parlux's numbers tell us all we need to know about this company. That its P/E is 540. That its sales growth seems to be slowing during the past few years. That growth is projected at 15% per year long-term ... but there's just one analyst projecting this.

None of which is encouraging -- and all of which suggests this 52-week-high-hitter could be ready for its fall.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about Parlux Fragrances -- or even what other CAPS members are saying. We really want to hear your thoughts. Click on over to CAPS and tell us what you think.

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