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, Nasdaq.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 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 110,000 stock gurus (and counting) in CAPS have to say about the list's latest contenders:

Stock	One Year Ago Today	Recent Price	CAPS Rating (5 Max):
Weatherford International  (NYSE: WFT)	$27.62*	$48.46	*****
Hercules Offshore (Nasdaq: HERO)	$32.38	$38.31	*****
BP Prudhoe Bay  (NYSE: BPT)	$63.93	$100.77	*****
Complete Production Services (NYSE: CPX)	$25.85	$36.55	*****
Goldcorp (NYSE: GG)	$23.56	$46.36	****

Five stars = highest possible CAPS rating; one star = lowest. Companies are selected from the "NASDAQ 52 Week High" list published on Nasdaq.com the Saturday following close of trading last week. One-year-ago and recent prices from Yahoo! Finance. CAPS ratings from Motley Fool CAPS.
*Weatherford International stock split 2-for-1 on May 27.

Everybody loves a winner
When stocks soar on the wings of success, bears become rare. So I guess it should come as no surprise that in the midst of last week's growling bear market, investors remained loyal to the uber-successful stocks listed above. Out of five stocks making the cut, the worst-respected company on this list still earns an above-average four-star rating on CAPS.

Smells like dog
Now, the purpose of this column is to help you identify overblown growth stories -- rising stocks that the "wisdom of crowds" believes are destined to go right back down. We don't have any of those today.

So what's the next best thing to watching as the CAPS community pin a dog of a stock? Well, we can at least begin looking for fleas. Of the five companies we named above, Goldcorp has the highest bear factor of the bunch, with 102 out of 1,622 investors polled betting against the stock. So far, that's been a sucker's bet, but could that change? You be the judge, as we review ...

The bear case against Goldcorp
KenbuddyPS summed up the bear thesis in two words back in April: "Commodities bust." At about the same time, Trunks9 added some detail: "One sure sign of a bubble is when people completely ignore price to earnings and and believe that no price is too high."

But the most detailed argument against Goldcorp, by far, comes from BarbarasBasics, who tells us:

Gold shares are amazingly predictably seasonal. I have looked at seasonal patterns for over a hundred years and it is running about 95% that gold and the stocks have seasonal lows within a few weeks of July 4th, and again within a few weeks of Dec 31st. The reason is that the mining companies like to show a clean balance sheet for maximizing their banking relationships at this time and stocks follow. So [Goldcorp] is due for a pullback just from that. In addition, some easing of commodity prices, especially oil and soft commodities, seems likely to me and the commodity funds now mix oil, gold and softs, so if any of these is conspicuously weak, it pulls the fund and others down with it.

Addressing Trunks9's concern about P/E first, I do see some basis for worry. Goldcorp sells for a P/E of 58, which seems pricey relative to peers Yamana Gold (NYSE: AUY) and Kinross Gold (NYSE: KGC) -- both of which trade with P/Es in the low 40s. And while growth estimates for Yamana may explain the lower valuation there, analysts are looking for Kinross to grow nearly 2 percentage points faster than Goldcorp over the next five years. Also worth pointing out: Goldcorp and Kinross report having almost identical amounts of gold reserves -- yet Goldcorp carries a market cap more than twice that of Kinross.

So relatively speaking, Goldcorp is worth more than Kinross, yet it's growing its earnings less swiftly and boasting less shiny metal on its balance sheet. I admit that this falls a few cogs short of a working "sell" thesis, but it does make for an interesting comparison.

Time to chime in
Are four stars enough to convince you to own Goldcorp? Does the stock have other issues we didn't address here? Click on over to CAPS, and tell us what you think.