Rocket Stock or Dud?

"The bigger they are, the harder they fall." It's the worst nightmare of every investor in today's market -- buying a rocket stock just before it takes a nosedive.

Now, I readily admit that stocks sometimes rise for a reason. But other times, the rise becomes the reason. No matter how often we caution them otherwise, investors have a habit of buying "hot" stocks, and trusting momentum to keep them moving upwards.

Unfortunately, if the price goes up too much, even a great company can turn into a lousy investment. Below, I list a few stocks that may have done just that. According to the smart folks at finviz.com, these stocks have more than doubled since the beginning of this year, and they just might be ripe to fall back to earth.

Companies are selected by screening for 100% and higher price appreciation year-to-date on finviz.com. Current pricing provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Each of these stocks has already enjoyed remarkable gains over the past six months -- but the race isn't over yet. The 135,000 (and counting) investors who make up Motley Fool CAPS are still cheering them on to greater profits.

But here's the weird thing. Level 3, Cypress Semi -- these stocks have high name recognition. You'd expect a certain level of enthusiasm about them. Yet the top-rated stock on today's list isn't anything like a household name -- unless your house is located in Sao Paulo, Brazil.

Down there, Companhia Siderurgica Nacional (CSN) is a $19 billion powerhouse of the steel industry. Let's learn a little more about it as we examine ...

The bull case for Companhia Siderurgica Nacional 

CAPS All-Star ursinho believes that "along with Gerdau, this steel company will grow in value as its solid fundamentals and conservative management team become more widely known." michaeltbryant adds that CSN has a "significant advantage because it owns the iron ore it uses. Based in Brazil." As a result, though, CSN competes not only with Gerdau on the steel end of the supply chain, but also with local rival Vale (NYSE:VALE) in the iron mining business.

Its multiple competitors notwithstanding, tennhogg argues that CSN will outperform because "[b]asic materials that will figure into recovery of world economy." And while we wait for the economy to recover, we can enjoy CSN's "[g]ood and growing dividend."

How good is the dividend?
CSN compensates its shareholders with a 4% yield -- not too bad, even though a Brazilian court blocked part of the payout. That dividend is remarkable, given the perilous state of Big Steel: Dividend cuts seem to be contagious in that sector. Our local version of CSN, U.S. Steel (NYSE:X), has cut its payout to a mere 0.5% yield.

This story gets better once you read past the dividend. CSN generates significant free cash flow from its business, and has done so for years. Valuation-wise, the steelmaker carries an ultralow P/E of less than 7, despite consensus expectations for 17% annualized five-year profit growth at the company. If and when that growth materializes, not only will it prove CSN exceedingly cheap at today's price, but it'll likely also give the company so much extra money that it will be able to jack up its dividend a bit.

Time to chime in
So there you have it, folks. A decent dividend, which could well bounce back in future years. A low-P/E stock. And plenty of optimism about future growth trends. What more could you want?

No, seriously. What more could you want? If you know of a better steel investment out there, we want to hear about it. And if you've got an opinion on CSN in particular, we've got a place to voice it. Click on over to Motley Fool CAPS, and tell us what you think.