Get Ready for the Fall

"The bigger they are, the harder they fall." This old 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, MSN Money 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, acrophobic terror (whatever you do, don't look down).

Over on Motley Fool CAPS, thousands of investors just like you are watching these same companies and voting with their gut on 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 some of the smartest investors out there are panning 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 Highs" list as just 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 Highs" list at MSN Money. What does our panel of more than 24,000 stock gurus (and counting) have to say about them?

Where's the love?
Surprisingly for a set of stocks hitting their highest heights of the past 52 weeks, Fools seem pretty ambivalent about today's list. One stock -- Motley Fool Stock Advisor pick, Paccar -- gets just an average, three-star rating from investors. Bracketing it to both the upside, and the down, are one trio of expected outperformers and another of likely losers. Zeroing in on the laggardliest of the laggards, today we'll be focusing on residential real estate developer Avatar Holdings.

The bear case on Avatar
Out of 56 Fools who have rated Avatar on CAPS, a majority love the company. But that's to be expected with any stock hitting its 52-week high. After all, (almost) everybody loves a winner. As for those who don't, here's what our very best players, the CAPS all-stars, have to say about it:

• Setting up the debate is Valuesleuth, who laconically comments that Avatar is a "great company, on sale cheap."
• "Not so!" object fellow all-stars spiritof78 and StatsGeek. Both of these Fools warn us that appearances can be deceiving. Spirit fears an asset write-down is in the works, and asserts: " P/E looks attractive if you believe the earnings numbers, I for one do not." StatsGeek thinks similarly, noting that: "P/E looks cheap, but orders were down 78% in the most recent release. When 'E' collapses, that low p/e will be history. Also, Palm Beach? Horrible, horrible market."

Of course, in the world of investing, no view should be written in stone -- four times a year, the facts change as companies update us on their earnings, and their trailing-12-months numbers evolve. So, too, it is with Avatar, which released its Q4 and full-year 2006 numbers on Friday, after the above comments were penned. (In case you're interested, Q4 profits tripled, but management complained of rising home contract cancellations, and forecast no "meaningful improvement in our markets in the near term.")

Do Avatar's gloomy views eclipse its good news? Or is the opposite true? If you've got an opinion on the matter, here's your chance to share it with the world. Click on over to CAPS and drop your $0.02 in the collection box -- just a figure of speech, of course. Playing CAPS is absolutely free.)

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked 38 out of more than 24,000 raters. Constellation Energy is a Motley Fool Income Investor choice. The Fool has a disclosure policy.