"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, MSN Money 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 115,000 stock gurus (and counting) in CAPS have to say about the list's latest contenders:


One Year Ago Today

Recent Price

CAPS Rating

(5 Max):

Johnson & Johnson   (NYSE:JNJ)




Genesee & Wyoming  (NYSE:GWR)




Health Care REIT  (NYSE:HCN)




Varian Medical  (NYSE:VAR)








Five stars = highest possible CAPS rating; one star = lowest. Companies are selected from the "New 52-Week Highs" list published on MSN Money on the Saturday following close of trading last week. One-year-ago and recent prices from Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Everybody loves a winner
When stocks soar on the wings of success, bears become rare. So it's no surprise to find this week's list largely inhabited by five-star stocks. What is surprising is that somehow, a subpar two-star managed to infiltrate the ranks. What in heaven's name is TJX doing here? I mean, we're in a consumer-led recession, right? Yet few businesses are more closely tied to consumer spending than TJX's near-eponymous T.J. Maxx and Marshalls stores are.

Plus ... aren't these the same guys who played the patsy in one of the largest customer-data thefts in history? The same guys who then proceeded to sit on the news for a month before telling their customers about the risk of identity theft? This is the stock investors choose to bid up to the sky?

Apparently so. But according to CAPS members, that's a mistake, and here's why:

The bear case against TJX
In May '07, NetscribeRetail summed up the bear thesis:

The company is looking for diversification, as growth in the core T.J. Maxx and Marshalls concepts has been slowing. Moreover as [its] more mature concepts reach the maximum number of stores, TJX will have to increasingly rely on its newer chains to grow, and so far results have been disappointing. Also The Bob's Stores chain does not fit into TJX's off-price retailing business model and could become a distraction for management. All in all the company is trying hard to grow but the future remains dicey.

In January, xfranco4bcn suggested that TJX is "overvalued at current market situation for the retail industry." The No. 1 player in all of CAPS-land shares that opinion: TDRH warned us in June that the government's checks aimed at economic stimulus are "going in the gas tank." The recent earnings reports out of Exxon Mobil (NYSE:XOM) and Conoco (NYSE:COP) might just support that opinion.

Yet as bearish as the sentiments above are, there's good reason for TJX's stock price to move on up. Margins are staying steady, and analysts' estimates of this quarter's earnings are on the rise. Plus, management just released its July figures that show same-store sales rising 3%. Those same folks are promising investors "strong" second-quarter results, including per-share earnings of perhaps $0.45, tomorrow. So as short-term prospects go, things look pretty good for TJX.

The long-term view isn't half-bad, either. TJX looks a little pricey at its current valuation of 21 times trailing earnings, yet this mature retailer churns out a ton of cash -- much more than you might guess from reading the GAAP numbers alone. TJX's price-to-free cash flow ratio comes in at a modest multiple of 15, which isn't unreasonable based on analyst estimates of 14% long-term growth.

Put it all together, and I'm forced to disagree with my Foolish peers this week. To my Foolish eye, TJX looks fairly priced, and barring unforeseen difficulties, it's unlikely to fall.

Time to chime in
Of course, the aim of this column isn't just to tell you what I think about TJX -- or even what other CAPS members are saying. We really want to hear your thoughts. Head on over to Motley Fool CAPS, and tell us what you think.

Motley Fool CAPS : It's fun, it's free, and it just might make you famous.

Genesee & Wyoming is a Motley Fool Hidden Gems selection, and both Johnson & Johnson and Health Care REIT are Motley Fool Income Investor recommendations. Try either service free for 30 days.

Fool contributor Rich Smith owns no shares of any company named above. You can find him on CAPS, pontificating under the handle TMFDitty, where he's ranked No. 585 out of more than 115,000 players. The Fool has a disclosure policy.