"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)

Precision Castparts (NYSE: PCP)




Target (NYSE: TGT)




Home Depot (NYSE: HD)




Time Warner (NYSE: TWX)




Sears Holding (Nasdaq: SHLD)




Companies are selected from the "New Highs & Lows" lists published on WSJ.com on 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 have given a sigh of relief -- and stocks have turned cautiously green again. The S&P 500 has now strung together four "positive" weeks in a row, and some of the biggest names in stock-picking are once again hitting 52-week highs.

But can they hold on to (and add to) these gains? Opinions are mixed. CAPS members appear to believe Target, Home Depot, and Time Warner are priced fairly relative to future prospects, but worried that Sears has gotten a little ahead of itself. Fortunately, there's one stock on today's list about which Fools have no doubt:

The bull case for Precision Castparts
CAPS member lmbshark expects to see great results as Precision Castparts profits from "Strong 787 demand." If top management delivers on its promise to maximize cash flow and "take advantage of every single opportunity to derive value from our businesses," that would help. (It's a must, in fact, if Precision Castparts is to offset demand declines from "destocking" at industrial customers like General Electric (NYSE: GE) and United Tech.)

CAPS All-Star terpgrad is confident that Precision Castparts can pull it off, however, arguing in September: "This is an extremely well run company, a leader in specialized parts for aerospace, great relationships w. customers. lots of cash, min debt. not a flash in the pan but a long-term winner, top drawer company."

And fellow All-Star mtracy9 agrees, writing one year ago: "Precision Castparts has the reserves needed to weather the current economic storm. As the economy begins to recover and as the Boeing (NYSE: BA) company begins to fill orders in 2010 for its Dreamliner commercial airplane, this company and its stock price should recover nicely."

And in fact, even before the first 787 has been delivered, we've already seen a nice recovery  in Precision Castparts' stock price. mtracy9's "outperform" rating on the company has simply thrashed the market since then, more than doubling over the past year and outperforming the S&P's returns by better than 67 percentage points. Pretty impressive, huh? But here's the thing ...

That's as good as it gets.

Valuation matters
Does Precision Castparts' future look bright? Absolutely. Boeing's 787 program is back on track. Its backlog book is bulging, and there's every prospect for oodles of orders of plane parts from Precision Castparts. Problem is, all of this promise has already been more than baked into the stock price.

Selling for more than 18 times earnings, Precision Castparts already looks richly priced relative to consensus estimates of 14% long-term earnings growth. Valued on its free cash flow ($754 million at last report), the company looks even more expensive at a price-to-free cash flow ratio of more than 23.

Foolish takeaway
To my Foolish eye, that's just plain too much to pay for this plane-parts maker. If you own Precision Castparts today, consider patting yourself on the back for your foresight in buying when the stock was cheap, taking your winnings, and seeking out the next bargain. (Here's a good place to start.)

But hey -- feel free to disagree. If you think Precision Castparts' stock has still got "legs," click over to Motley Fool CAPS now, and tell us why.

Home Depot is a Motley Fool Inside Value choice. Precision Castparts is a 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. 680 out of more than 160,000 members. The Fool has a disclosure policy.