"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):

United Financial Bancorp 

$12.75

$14.00

Not rated

Suffolk Bancorp

$31.16

$38.31

**

Bank of Marin Bancorp  (NASDAQ:BMRC)

$31.50

$33.56

**

IberiaBank  (NASDAQ:IBKC)

$50.04

$57.71

*

Commerce Bancshares  (NASDAQ:CBSH)

$46.13

$47.77

*

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 provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Methinks me sees a pattern
Correct me if I'm wrong -- but isn't there a credit crisis going on? If so, then I have to say that five smallish banks popping up on the 52-week highs list seems strange.

And when I say "smallish," I'm being generous. If Citigroup (NYSE:C) and Merill Lynch (NYSE:MER), Morgan Stanley (NYSE:MS) and JPMorgan Chase (NYSE:JPM) occupy the "Major Leagues" of banking, then most of the stocks on today's list would have difficulty getting permission to play Little League ball. 

Even so, they're equal to the Majors in one respect ... they're equally despised. Not one of these bankers scores any higher than a sub-par two-star rating on CAPS. The least-liked of the bunch (also the largest of the bunch) is Kansas City, Mo.-based Commerce Bancshares. Curious why? So am I.

The bear case against Commerce Bancshares

  • We'll start off with an introduction to the bank courtesy of dlduff, who wrote in May that: "Commerce Bancshares Inc. is the holding company for Commerce Bank, which operates in approximately 360 locations in Missouri, Illinois, Kansas, Oklahoma and Colorado. And I've been banking with them for years. They're a conservative regional bank who should avoid much of the sub-prime mess. Unless the country slides into a pretty severe recession they should be fine."
  • Not all CAPS members are as sanguine about Commerce's prospects, however. db371114 thinks business isn't great at Commerce lately, reasoning back in June: "if they don't loan money they won't make money and there not loaning money."
  • CAPS All-Star dexion10 agrees ... with both of the previous pitches: "Good bank-overvalued given current banking environment."

The test
Now, let me preface the following with a disclaimer: I am no banking guru. Far from it, in fact. But I do have three rules that I try to stick to when evaluating banking stocks:

  • First, I look for a price-to-book ratio of less than 2.0.
  • Second, I want a return on equity of greater than 20%.
  • Third and finally, a return on assets above 1.5%.

Does Commerce pass this three-part test? In a word, "no." It actually fails all three elements, scoring a P/B ratio of 2.1, a 14.4% ROE, and a 1.4% ROA.

And yet, I have to admit -- in a lousy banking environment like today's, Commerce's numbers land close enough to the mark that I'm willing to give it a pass. Close enough to my criteria for a "good bank" that I'm not willing to call Commerce a bad bank. Close enough that I don't, in fact, believe this one will fall.

Time to chime in
Or am I being overgenerous? A lot of CAPS members seem to think so, but what's your opinion?

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. 507 out of more than 115,000 players. JPMorgan Chase is an Income Investor recommendation. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.