Get Ready for the Fall?

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

Every day, WSJ.com 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. On our Motley Fool CAPS investing community, these top stocks usually enjoy favorable ratings, since everyone loves a winner.

But not always ...

Companies are selected from the "New Highs & Lows" lists published on WSJ.com on Friday last week. 52-week low and recent price 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 see that most of these 52-week high-hitters earn above-average ratings ... except that it is surprising. I mean, with all the talk of new regulations on carbon emissions floating around D.C., should an energy utility like Duke really be doing this well? And if health-care reform is really going to target the profits of health insurers like WellPoint, aren't you surprised to see it doing so well?

And perhaps you're doubly surprised to learn that the top-rated stock on today's list is one of these companies with a legislative bull's-eye painted on its back? Let's find out why as we dig into ...

The bull case for UnitedHealth Group
As CAPS All-Star IsleGirl2010 tells it, "health care reform" just isn't that scary, because "we'll always need health care and the government will need a partner in health care reform. this company should be well position to take advantage of that."

Moreover, fellow All-Star devoish argues that since "they have helped write health care reform policy ... There is almost nothing bad for their business models in the proposals moving through Congress. The only price controls being talked about expire before 2011 if they even get included." Meanwhile: "Medicare for low income people might be expanded to include age 50 and above. This group (older and low income) is relatively expensive and shifting their burden onto taxpayers through Medicare will not hurt insurers."

Last word goes to All-Star investor KevinKPU, who opines: "As with everything our government does, they will settle on a middle ground which accomplishes nothing. [UnitedHealth] and its peers will rebound and continue to thrive when all bark-no bite health care bill passes congress."

Cynical? Well, yes. But this pretty much echoes my own thinking about the future of health care. And if the investors quoted above are right -- and if I'm right -- it's hard to look at UnitedHealth and see anything but a strobe-light-flashing, siren-wailing "buy!"

I mean seriously, folks, if you saw any other company selling for 10 times earnings and less than seven times free cash flow, projected to grow at 9% per year long-term, and carrying so little net debt that its ability to stick around and see that long-term success is all but assured -- you'd buy it, right? It's only the fact that UnitedHealth is a "health insurance company" that causes any reservations about the stock. (The same reservations have stellar health-care companies from Pfizer (NYSE:PFE) to Merck to Johnson & Johnson (NYSE:JNJ) all trading at similar below-market multiples, I might add.)

Foolish takeaway
When opportunity knocks this loud, you'd be a fool (small "f") not to at least open the door and size it up; 145,000 CAPS members have done the knocking. Now it's up to you to decide if they know what they're talking about, when they're talking up UnitedHealth.

Take a gander, and let us know what you think.

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