"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 sometimes, stocks rise for a reason. But sometimes, the rise becomes the reason. No matter how often we caution them not to, investors do have a habit of buying "hot" stocks, and trusting momentum to keep 'em moving upwards.

Problem is, if the price goes up too much, even a great company can turn into a lousy investment (and if the company was less than great in the first place ...) Below I list a few stocks that may have done just this. Stocks that, according to the smart folks at finviz.com, have doubled (or nearly so) over the past year, and just might be ripe to fall back to earth.


Recent Price

CAPS Rating
(out of 5)

Magna International (NYSE: MGA)



Las Vegas Sands (NYSE: LVS)



Chipotle Mexican Grill (NYSE: CMG)



Companies are selected by screening for 100% and higher intraday price appreciation over the last 12 months on finviz.com. Five stars = highest possible CAPS rating; one star = lowest. Current pricing provided by Yahoo! Finance. CAPS ratings from Motley Fool CAPS.

Question: What do auto parts have in common with casinos? What do either of these things have to do with the fine art of burrito-assembly? The answer to both questions is: The companies behind these products are some of the hottest stocks on the Street.

Over the past year, shares of Chipotle and Las Vegas Sands have each nearly tripled in value, while poor Magna International shareholders have had to content themselves with a mere doubling of their share price. (Boo-hoo.) Now, some folks will tell you that an object in motion tends to stay in motion -- and that therefore, Chipotle and LVS will continue to outperform Magna. CAPS member baselineace, for example, says Chipotle is the "undisputed leader in the exploding fast-casual restaurant industry" and "has only 1,000 stores, nearly all of which are in North America, with plans to expand domestically and overseas." Similarly, optomisticholder believes that "with the Marina Bay Sands now fully in form, LVS is ready to shoot for the moon."

But the fact remains that, overall, CAPS investors seems seriously down on both these stocks. The two-star ratings they give 'em suggest most Fools believe that for both Chipotle and LVS, their best days are behind them -- but not so for Magna International.

The bull case for Magna International
Four-star-rated on CAPS, this little-known Canadian auto parts manufacturer boasts strong support from individual investors. And is it any surprise? As CAPS All-Star turtle286 argues: "With orders increasing, higher EPS estimates, a dividend hike, and share repurchase agreement issued, not to mention the potential of a split 2-1 what's not to like?!"

Retiredat13 likes the stock's "Low P/E" (at 11 times forward earnings, Magna appears cheaper than rival parts-suppliers like Dana Holding (NYSE: DAN) and Johnson Controls (NYSE: JCI)). stocks4brandt points out that the quality of earnings is high at this company, giving Magna a "very low fcf multiple" as well.

And honestly, whichever way you choose to value the company, it's hard to come to any conclusion other than that Magna is unbelievably cheap. Valued on GAAP earnings, the company's trailing price-to-earnings ratio of 18.5 makes it look a bargain should the company achieve long-term consensus growth estimates of 24.6%. Valued on free cash flow, it's ... even cheaper! With $763 million in trailing free cash flow (23% more cash profit than the company is allowed to claim as "net profit" under GAAP), Magna looks like a steal at a P/FCF ratio of just 16 -- and even that doesn't count the more than $1.5 billion in net cash on Magna's books.

Opportunities missed, and those still knocking
Granted, the prospects for Magna aren't as bright as they once were. The company fumbled its chance to pick up General Motors' (NYSE: GM) Opel division on the cheap last year. Now that GM is public again -- and profitable -- it's unlikely Magna will ever get a shot at this division again. I've also heard (unconfirmed) rumors that Magna's deal to build the innards of the new electric Focus for Ford (NYSE: F) is on the rocks. That it may not happen after all -- indeed, that it may already have been canceled.

But the truth of the matter is that despite these setbacks, Magna remains a force to contend with. The company's balance sheet is rock solid. Profits are strong, and of high earnings quality. Whether Magna gets to build Ford's new electro-buggy or not, whether it becomes a full-fledged automaker in its own right, or instead remains "just" an uber-profitable parts supplier to the industry, I see nothing on the horizon that can pull this stock down. To me, Magna looks like one rocket that's still got fuel in the tank.

But hey, feel free to disagree. If you've got a different opinion of Magna International, tell us about it -- on Motley Fool CAPS.

Fool contributor Rich Smith does not own (or short) shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 605 out of more than 170,000 members. The Fool has a disclosure policy.

General Motors is a Motley Fool Inside Value selection. Ford Motor is a Motley Fool Stock Advisor recommendation. Chipotle Mexican Grill is a Motley Fool Rule Breakers selection and Motley Fool Hidden Gems choice. The Fool owns shares of Chipotle Mexican Grill.

Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.