"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. Every day, investors read the list and tremble -- some with greed, others with terror. Within our Motley Fool CAPS investing community, these top stocks generally enjoy favorable ratings, since everyone loves a winner ... but not always:


52-Week Low

Recent Price

CAPS Rating
(out of 5)

Raytheon (NYSE: RTN)




Black & Decker (NYSE: BDK)




Whole Foods (Nasdaq: WFMI)




Nike (NYSE: NKE)




UAL (Nasdaq: UAUA)




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

A sigh of relief ... and then a roar
As fears of a Greek debt meltdown continue to fade, traders have released their white-with-fear grip on their Bloomberg terminals, markets gave a sigh of relief -- and stocks turned cautiously green again. Buyers are back in the market, and some of the biggest names in stock picking are once again hitting 52-week highs.

Not all Fools are certain the crisis has passed, however. To the contrary, investors give most of these stocks only middling three-star ratings, and seem especially leery of single-starred UAL (its vote of self-confidence in making a major airplane purchase from Boeing (NYSE: BA) last week notwithstanding). But there is one stock on today's list that they believe will keep flying high.

The bull case for Raytheon
CAPS All-Star mrindependent describes Raytheon's balance sheet as "pristine" while praising its strong dividend and calling the earnings outlook: "solid for 2010 and 2011. On an intrinsic value basis, the company looks deeply undervalued. ... Raytheon is well positioned compared with other defense contractors because the company appears to be a leader in 'technologies of the future' including missiles, radars, sensors, surveillance and reconnaissance equipment, communication and information systems." (And I agree.)

rondu adds that the "recent cyber attacks by China" bode well for defense contractors like Raytheon (and don't forget civilian cybersecurity specialists like Cisco (Nasdaq: CSCO) as well).

But even more conventional security analysis suggests that Raytheon's stock is positioned to outperform. dean7878 boiled down the bull thesis for Raytheon to its essentials back in October: "Great earning, reasonable price, and great growth means that this company's stock will continue to soar."

I could not agree more. In fact, 'most any way I look at Raytheon's numbers, I like what I see. Raytheon sports perhaps the cleanest balance sheet of any major defense contractor, armed with $2.6 billion in cash, and only $2.3 billion in debt. Its P/E of 11.5 seems reasonable for an analyst-estimated 8.7% grower with a 2.2% dividend. Best of all, Raytheon is actually more profitable than it seems.

Whereas GAAP accounting only permitted the company to report $1.9 billion in profits last year, the company in fact generated $2.4 billion in free cash flow -- meaning you can own this leading light of the defense industry for the low, low price of less than nine times free cash flow. Astounding.

Foolish takeaway
Put it all together, and I can come to only one conclusion here, folks: Far from tottering on the brink of a fall, Raytheon's priced to outperform -- and keep on outperforming the market for years to come.

Of course, if you disagree with me, well, that's your right. In fact, here at the Fool we welcome contrary opinions -- pull up a soapboax if you think I'm wrong, and tell us all about it.

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

Whole Foods Market is a Motley Fool Stock Advisor selection.

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. 621 out of more than 150,000 members. The Fool has a disclosure policy.