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

 

One Year Ago Today

Recent Price

CAPS Rating (out of 5):

Wrigley  (NYSE:WWY)

$54.74

$77.81

*****

Western Union  (NYSE:WU)

$20.97

$25.10

*****

Almost Family  (NASDAQ:AFAM)

$18.09

$26.45

*****

Basic Energy Services (NYSE:BAS)

$26.75

$32.32

*****

Illumina  (NASDAQ:ILMN)

$39.61

$84.61

***

Companies are selected from the "NASDAQ 52 Week High" list published on Nasdaq.com on the Saturday following close of trading last week. Year-ago and recent prices provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS as of June 23.

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.

Except -- hold on a minute. There's one stock here that CAPS players seem to give only half-hearted endorsement. While far from being panned, high-tech geno-typist Illumina's three-star rating seems a far cry from the full-throated cheering surrounding the other stocks on today's list. Let's find out why some investors think there's a bear case to be made against Illumina.

The bear case against Illumina

  • Writing in January, 21popsontop argued: "Although sales growth shows nice improvement, all else is downhill big time and does not come close to being able to justify the high flying price. Net profit margin minus 82.00% High dept/Equity Ratio for a company showing income minus-257 million."
  • dothedow is similarly skeptical of Illumina's (presumably too-) rapid rise, criticizing its: "HighGain+ HighPE."
  • As is CAPS All-Star LurkyLurky, who appears to be playing a hunch when commenting: "It just seems to be flying a little high, and I think I might be able to pick up a few points as it slows down a bit."

So Illumina has more than doubled in price over the past year. Is that in and of itself reason enough to sell it? On balance, the CAPS community doesn't think so -- else they'd be giving it something less than the shoulder-shrug of a three-star rating. So is there any better reason to avoid this stock? 

You'll no doubt be shocked to learn that I think there is ... and that I'm going back to the valuation well for my argument. Illumina trades for 145 times trailing earnings, yet the consensus of the baker's dozen of analysts who track it is that Illumina's earnings will grow at "only" 30% per year long-term. While 30% would ordinarily be a superb number, I'm not at all certain it justifies a triple-digit P/E. (Especially not when that stock is cash flow-negative.)

Then again, I used to say the same thing about Baidu.com (NASDAQ:BIDU) and salesforce.com -- so what do I know?

Time to chime in
Seriously. That's not a rhetorical question. Click on over to CAPS and tell me what I don't know about Illumina.