Get Ready for the Fall

"The bigger they are, the harder they fall." This old saying sums up the biggest nightmare of every homeowner, every gold buyer, and every investor in today's market. Dare ye buy at the top?

Every day, Nasdaq.com publishes a list of the market's top stocks -- the companies whose shares have hit their highest intraday price in the past 52 weeks. Every day, investors read this list and tremble -- some with greed (big mo', baby!), and others in pure 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 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, the best course of action is to use the Nasdaq "52 Week High" list as a starting point for research. After all, stocks go up (and down) 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 contenders, drawn from the latest "52 Week High" list on Nasdaq.com. What does our panel of more than 60,000 (and counting) stock gurus have to say about them?

Everybody loves a winner
When stocks soar on the wings of success, bears usually become rare. So it's a bit surprising to see the stocks on today's list adhere to little more than a bell curve. Superstar performers their stocks may be, but investors are lukewarm on the bunch in aggregate.

Moving from the aggregate to the specific, we have one stock clearly disfavored above all the rest. That's the one we'll be looking at today, so without further ado, let's review ...

The bear case against Hewitt Associates
One of the great things about members of the CAPS community is that, between free access for all, and anonymity for those who desire it, we often attract investors with uniquely personal insights into the companies we track. That's what we get from CAPS All-Star MyKindaTown, who confides, "I worked at this company, in the main headquarters." So let's give MyKindaTown pride of place in introducing us to the company:

• "Consider that their business is the 'people business'. They help other companies offer benefits and services to their employees. The funny thing is ... they have the WORST turnover in the outsourcing industry. And it's a TREND. ... People have been leaving in droves for years and they just hire more, who promply [sic] leave again. I was honored when I left as the CEO resigned as well as his 2nd in command I think. ... Hewitt, as large as it is, will pass into mediocrity some day. The benefits of large-scale volume pricing do no good if your employees -- the ones the employees of your clients will be talking to -- don't care."
• A sentiment echoed by slickfool007, as it turns out: "Unable to achieve expected margins in the large MP HRO deals. Benefits and consulting business are mature. Stock will struggle until management figures out how to make money on the large MP HRO deals."
• Our first comment came from an All-Star, so let's end with a pithy observation from another. sojournerks writes simply that the stock is "too highly valued."

But is it really? I agree that the company's projected 14%-per-year growth rate doesn't appear capable of supporting its valuation of 33 times trailing earnings. But if you peer through the looking glass of generally accepted accounting principles and examine Hewitt's free cash flow, the multiple of 15 there looks reasonable when placed alongside the expected growth rate.

I agree Hewitt is not screamingly cheap, but it doesn't look overvalued to me, measured against the firm's cash profits. Nor am I the only Fool to think along these lines. Why, as recently as March, fellow Fool Toby Shute named Hewitt one of the "5 Stocks I Shouldn't Have Sold."

Time to chime in
But the aim of this column isn't just to tell you what Toby and I think about Hewitt -- or even what our other CAPS players say. We also want to hear what you know about the company. Is it the disaster waiting to happen that investors like MyKindaTown describe, or can Hewitt still "do it"? Tell us what you think. If you've got an opinion, we've got a place to voice it.

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 No. 308 out of more than 60,000 rated players. The Fool has an ear-filling disclosure policy.