"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, WSJ.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 125,000 stock gurus (and counting) in CAPS have to say about the list's latest contenders:


Company


One Year Ago


Recent Price

CAPS Rating
(5 stars max.)

VSE

$37.56

$44.12

*****

Aceto

$7.35

$10.86

*****

Puget Energy  (NYSE:PSD)

$27.25

$28.03

***

Apollo Group  (NASDAQ:APOL)

$76.81

$85.27

**

Corinthian Colleges (NASDAQ:COCO)

$12.48

$16.21

*

Five stars = highest possible CAPS rating; one star = lowest. Companies are selected from the "New Highs & Lows" lists published on WSJ.com on the Saturday following close of trading last week. One year ago and current pricing provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

"Everybody loves a winner"
When stocks soar on the wings of success, bears become rare -- sometimes. Investors sure seem to have taken a liking to contractor VSE and professional chemist Aceto. But they're not nearly so hot on Puget Energy. And CAPS members seem downright pessimistic on our two professional professors this week, giving Apollo Group and Corinthian Colleges the lowest ratings of the bunch.

What? Do Fools think that "we don't need no education?" Or are there deeper concerns at work this week? We'll let Apollo stew for the time being, and today focus our attention on the worst-ranked stock on the list. Take out your red inkpens and let's set to grading:

The bear case against Corinthian Colleges
EducatorPlus seems to think Corinthian's basic business model is fundamentally flawed:

This company admits students primarily who have not done well academically. Some of these students do not have the skills to be in classes so that they become bad debt risk and also bad PR for the company. Admission recruiters want to meet their goals so that they will get any warm body they can convince to enroll. The assessment test helps students to get financial aid but it has nothing to do with how well these students can do in their academic programs. The market is narrow minded in looking at only admissions because if students do not graduate they do not get jobs and they do not pay bills.

But it gets worse. As the Fool's own TMFPhila (a CAPS All-Star, by the way) tells us:

After Sallie Mae (NYSE:SLM) told [Corinthian Colleges] earlier in 2008 that it would no longer lend to subprime borrowers, [Corinthian Colleges] put together their own $100m subprime business for which they assume all default risks. Worst of all, they put this business together in a matter of six weeks and are currently in the process of 'learning as they go,' according to management. Furthermore, the return on investment for their programs is terrible. People graduate with thousands of dollars in loans, part of which carry interest rates in the teens, and make between $15-20 an hour on average. This is a desperate company preying on desperate individuals.

All of which leads us to CashonDelivery's assessment that Corinthian is "not a well managed company whose price has held up under investor's perceptions of it being a recession-proof business. This will prove untrue as in-house lending negatively impacts their bottom line."

These analyses all sound worrisome in the extreme if they prove correct -- but to this Fool's eye, you don't need to wait for the story to play out to know that this stock can't escape gravity. It's just too darn expensive to own.

Corinthian currently trades for a 56-times multiple to trailing earnings. Sure, analysts expect it to grow those earnings at nearly 24% per year over the next five years, and maybe you think that's a fair price to pay for the potential (I do not.) But even if you do, consider too that Corinthian isn't actually making any money off of its business right now. Quite the contrary: It's burning nearly $12 million a year in free cash flow and, in fact, has been free cash flow negative for the past two years running.

Fools, maybe you think for-profit education is a good business idea in general. Firms like Strayer (NASDAQ:STRA), Apollo, DeVry (NYSE:DV), and ITT Educational (NYSE:ESI) sure seem to be making a good go of it. But unlike almost any peer you can name, Corinthian Colleges is not making money at this game.

When everyone else is making out like bandits, and one company is the odd man out, there's little doubt in my mind: Corinthian is destined to fall.

Time to chime in
But hey, feel free to disagree. If you see a future for Corinthian Colleges, here's your chance to pitch it. Just click on over to CAPS and tell us where we're getting this story all wrong. Extra credit for doing it with style.

Beginning Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.

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. 1,769 out of more than 125,000 members. Strayer Education is a Motley Fool Stock Advisor pick. The Fool's disclosure policy ignores gravity.