"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.

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 not always ...


52-Week Low

Recent Price

CAPS Rating
(out of 5)

Laboratory Corp. of America Holdings (NYSE:LH)




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Sears Holdings (NASDAQ:SHLD)




Companies are selected from the "New Highs & Lows" lists published on WSJ.com on Friday last week. 52-week low and recent price provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Who's hot? (Everybody!) Who's not? (Nobody!)
Which stocks hit 52-week highs last week? A better question would be, who didn't hit a high. But if you poll the 145,000-plus investors who make up CAPS, a lot of these stocks are about to pull an Icarus -- they've had their day in the sun, and are bound to fall Earthward any day now.

Not so with today's top-ranked stock. Turns out, a lot of the best investors on CAPS believe LabCorp is immune to gravity's pull. But why?

The bull case for Laboratory Corp. of America Holdings
CAPS All-Star jwagner2000 introduced us to LabCorp last summer as "a prime provider of medical laboratory services. They are everywhere and do everything. ... Their financial basis is strong and their business will just keep growing with increased demands for medical lab services. [LabCorp] has been a solid performer, and I look for continued good results for the long run."

athenamike adds: "LabCorp is building scale and increasing returns on capital over time ... Medical lab testing is growing, it's a relatively small medical expense, it can dramatically improve medical outcomes, and it is becoming an oligopoly between Quest Diagnostics and LabCorp."

All-Star investor DJWriter boils the buy thesis down to its bare essentials, summarizing in just eight words: "vast national infrastructure ... Good management ... Strong Balance sheet."

It would be hard to argue with any of these claims, even if I wanted to. With more than 1,600 service centers scattered across the U.S., and a client list that includes all the big names in health -- from Pfizer (NYSE:PFE) and Glaxo on the pharma side, to UnitedHealth and Aetna (NYSE:AET) in insurance -- LabCorp really does compete on a scale matched only by Quest. As for the quality of management, LabCorp's 28% return on equity speaks for itself. And LabCorp's balance sheet looks pretty much impregnable. Net debt stands at just $1.3 billion -- a sum the company could extinguish in less than two years, thanks to its robust $740 million in annual free cash flow.

Foolish takeaway
When you consider that all of the above can be had for the low, low price of just 11 times LabCorp's free cash flow -- and that the company should grow its profits north of 12% per year over the next five years -- it's hard to believe the bargain we're being offered on this stock. It's even harder for me to imagine what might send LabCorp's shares a-tumblin'.

ObamaCare? Maybe ... I'm just not convinced the whole health-care scare is all that scary. But feel free to disagree with me. If you see something in the Senate's (or the House's, or the president's) health-care plans that makes you think ill of LabCorp, here's your chance to point it out to us. In the meantime, I maintain my healthy respect for this stock.

LabCorp and UnitedHealth are Motley Fool Stock Advisor recommendations. Pfizer, Sears Holdings, and UnitedHealth are Motley Fool Inside Value recommendations. The Fool owns shares of UnitedHealth Group. 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. 1025 out of more than 145,000 members. The Fool has a disclosure policy.