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. Every day, investors read the list and tremble -- some with greed, others with terror. Within our Motley Fool CAPS investing community, these top stocks generally 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.

A sigh of relief ... and then a roar
As fears of a Greek debt meltdown continue to fade, traders have released their white-with-fear grip on their Bloomberg terminals, markets have given a sigh of relief -- and stocks have turned cautiously green again.

The S&P 500 has now strung together six straight positive weeks in a row, helped in part by Capitol One's 5.5% increase last week. And pretty much anybody who's anybody in the market (and a lot of bodies who are nobody at all), can point to at least a handful of "green" tickers in their portfolio. In fact on Friday, a whopping 181 names on the Nasdaq hit 52-week highs -- and the news on the NYSE was even better: 369 companies are living large on the Big Board.

But despite Capital One's big gain last week, that one-star rating scares me, so I'm going to discuss the single five-star rated company in our chart.

ConocoPhillips
Why buy Conoco, you ask? CAPS member M0neytree answers, because "COP is a good solid reputable company. … Oil will be a valuable commodity for years to come." AjarnMichael adds that Conoco's "recent efforts to reduce operating costs will payoff and in the meantime they offer a healthy 4% dividend."

Or as CAPS All-Star investor jbolley puts it: "I would like commodity exposure, oil and natural gas please, a 4% dividend payment, and a side of fries." Conoco gives you three out of the four. And while you'll have to order the takeout elsewhere, Conoco's $2.20-per-share dividend should more than cover the cost of the fries.

Deep-fried profits
Then again, Conoco isn't the only place for an investor to find oil and gas exposure, healthy dividends, and a side o' french-fried goodness. Last month, fellow Fool David Lee Smith took a slide rule to the oil and gas sector and concluded that Conoco stacks up poorly against many of its rivals in the oil patch, and in many respects.

After reviewing the numbers, I agree.

Valued on its assets (roughly 10.4 billion barrels of oil equivalent), Conoco carries an asset-to-enterprise value ratio significantly higher than those sported by fellow oil majors ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX). And to be perfectly honest, I don't think that's necessarily outweighed by Conoco's superior dividend yield.

In addition, other arguments against preferring Conoco over Exxon or Chevron are easy to see. Conoco's debt load, for example, far outweighs the burdens its rivals bear. Conoco carries a price-to-earnings ratio nearly identical to Exxon's, and is significantly more expensive than Chevron. Last and far from least, Conoco's projected rate of earnings growth lags both its rivals.

Foolish takeaway
Now, does any of this mean Conoco is a miserable business and a stock doomed to fall? Hardly.

To the contrary, about the worst I can say about Conoco is that in a field of well-priced oil equities, it comes in somewhere toward the back of the pack. Exxon looks like a slightly better bargain to me, Chevron is cheaper still, and if you're willing to look just a bit further abroad, I suspect Britain's BP (NYSE: BP) may offer the best bargain of the bunch (don't let that super-high P/E fool you).

But then again, with so many companies to choose from, I just don't see why you'd want to settle for second (or third, or even fourth) best.

But what do you think, Fool? Is there something about ConocoPhillips that I'm missing here? Something that should help it leap to the front of the pack? If you know, don't be shy: Give us a shout.

Conoco's stock hasn't even managed to match the market's returns over the past year. How do you tell a bargain stock from a value trap? Find out here.