"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 ...

Stock

52-Week Low

Recent Price

CAPS Rating
(out of 5)

QLogic  (NASDAQ:QLGC)

$8.69

$18.46

*****

Cisco Systems (NASDAQ:CSCO)

$13.61

$24.03

****

Universal Display  (NASDAQ:PANL)

$4.86

$13.34

****

Cree (NASDAQ:CREE)

$12.57

$39.09

***

Brocade Communications  (NASDAQ:BRCD)

$2.05

$9.41

***

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.

Tech is back!
That seems to be the upshot from today's list of winners. The bleak days of early '09 are a fading memory, and over on the Nasdaq, 138 stocks hit new 52-week highs Friday. (The Big Board did even bigger business, with 283 bell-ringers.)

As you can see above, investors are voting tech one of their favorite sectors. But of the five stocks named, one name rings out as the most loved of all. That's why this week, we'll be examining ...

The bull case for QLogic
Over on Motley Fool CAPS, a couple dozen Fools have chimed in with explanations of why they love QLogic -- but only one has written up the stock in recent months. Fortunately, that Fool is one of our best stock-pickers -- CAPS All-Star MagicDiligence, who wrote a veritable book on the company. A few excerpts:

  • "QLogic ... has 3 primary divisions. Host Products (about 75% of sales) sells ... HBAs, which connect computers to networked storage devices like hard drives or optical media. ... Network Products (~17% of sales) ... manufactures ... switches and storage routers. ... Silicon Products... delivers the remaining small portion of sales and is QLogic's legacy business..."
  • "[M]assive amounts of data storage ... are required for applications such as social networking, online photo and video sharing, digital distribution of audio and video content, "cloud computing" storage of documents and applications, and so forth. These trends will only intensify going forward ... driving demand for QLogic's products."
  • "The firm's competitive position in HBAs is strong-they hold nearly 40% market share [and] ... have consistently been taking share from Emulex [ (NYSE:ELX)], who has been embroiled in fighting off a hostile takeover by Broadcom [ (NASDAQ:BRCM)]."

MagicDiligence also praises the firm for having a "fortress for a balance sheet" and spinning off vast amounts of free cash flow -- and I agree.

Cash makes up 15% of QLogic's $2.2 billion market cap, and the firm has not a drop of debt to its name. Even better, every day this company stacks more dollar bills atop an already large pile. Free cash flow over the last 12 months amounted to $149 million -- more than 60% higher than what the company reports as "net income" under GAAP.

This all works out to an enterprise value of just 12.4 times its free cash flow, and earnings growing at approximate 11% per year over the next five years, by analysts' reckoning.

While I don't believe QLogic is the best bargain on the market today, I think that despite its 25 P/E, the company looks very close to fairly valued. Even here atop its 52-week high, I see no reason why it must fall.

Time to chime in
Of course, that's just my opinion -- one shared by more than 95 out of 96 CAPS All-Stars surveyed. What's yours?