In my weekly Fool column "Get Ready for the Fall," I run's 52-week highs list through the "wisdom of crowds" meter we call Motley Fool CAPS. The result: a list of stocks that have flown so high, investors are starting to get nervous about that whole "gravity" thing. But while many stocks will indeed plunge back to earth, some seem immune to gravity, steadily riding a rising megatrend to ever-greater heights.

Today, we'll move beyond stocks that have hit 52-week highs, and identify companies now surpassing five solid years of outperformance. Which of these will thrash the market averages for another half-decade? Here are this week's leading contenders:



Recent Price

CAPS Rating
(out of 5)

Bull Factor

Canadian National Railway (NYSE: CNI)




Express Scripts (Nasdaq: ESRX)




Lear Corp. (NYSE: LEA)












Companies are selected from the "New 5-Year Highs" list published on MSN Money on Friday. CAPS ratings from Motley Fool CAPS.

Hot stocks leave investors cold
Is the recession over? Warren Buffett says it is, and with the Dow still comfortably above the 10,000 mark, and the S&P posting sizable gains of its own these past three weeks, investors seem to be coming around to Buffett's way of thinking. Bullish sentiment is back, and the five stocks named above are all hitting five-year highs. The real question is whether they'll stay there.

Judging from the CAPS star ratings, investors appear to be rethinking their optimism about many of these stocks, but not about Canadian National Railway. Fools seem convinced that the bull thesis on this stock remains intact. Why?

The bull case for Canadian National Railway
CAPS member Manutius calls Canadian National the "best-run railroad in North America," transporting "resources (thermal coal, shale oil, potash) to China -- in bullishup trend long, intermediate, and short."

Which would seem to cover all the bases, and it's a popular viewpoint. NHWeston also thinks this rail baron occupies a no-lose position: "If Canada is commodities, then [Canadian National's] gonna be their shipper. If it's about grains, then it's goin' on [Canadian National]."

And as member baselineace points out, no less an analyst than Morningstar praises the company thusly: "Canadian National generates the highest margins of any railroad in North America, and we don't see this changing anytime soon."

Brand X: Cheaper than the rest
Indeed, Canadian National's operating profit margin is 800 basis points ahead of even its closest competitor, CSX (NYSE: CSX). The disparity in profitability between Canadian National and other lines like Norfolk Southern (NYSE: NSC) or Union Pacific (NYSE: UNP) is even more glaring. Why, even Buffett's beloved Burlington Northern was generating only 23.4% operating margins before Berkshire Hathaway (NYSE: BRK-B) took it out of play.

Now, you might think that it would be necessary to pay up for such quality, but you'd be wrong. Canadian National actually sells for only 15.3 times trailing earnings, which is cheaper than any of the competitors named above, despite the fact that all four railroads sport similar debt loads, and analysts expect similar growth rates from most of them. (Union-P is a bit speedier, but only by a couple of points.)

Railroads to nowhere
The real question, though, is whether being a "relative bargain" is enough to justify buying the stock. Personally, I'm not convinced.

Yes, Canadian National may be the "best of what's left." But to my Foolish eye, the company's 1.7 PEG ratio, and its even steeper price-to-free cash flow-to growth ratio (Canadian National generates only about half has much free cash flow as it reports as net "profit") tell me this stock has been infected by the Buffett Premium. Investors are following the Master down a blind path, and bound to be disappointed by where it leads 'em.

Of course, that's just my opinion. When you consider that no less an investor than the immortal (we wish) Buffett already disagrees with me, you certainly should not fear to voice an objection. So if you think Canadian National's worth buying -- don't be shy. Tell us why.

On Motley Fool CAPS.

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. 582 out of more than 160,000 members. InterMune is a former Motley Fool Rule Breakers selection. Canadian National Railway and Berkshire Hathaway are Motley Fool Stock Advisor picks. Berkshire Hathaway is also a Motley Fool Inside Value selection and The Fool owns shares of Berkshire Hathaway. The Motley Fool has a disclosure policy.