"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)

Novo Nordisk  (NYSE:NVO)




Cummins (NYSE:CMI)




Chipotle Mexican Grill (NYSE:CMG)




Southwest Airlines  (NYSE:LUV)








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

"Everybody loves a winner"
After the tumble markets endured over the last few weeks, you might be surprised to discover that any stocks are still doing well. But yes, a few of them are. Burrito-slinger Chipotle, Internet star JDS-Uniphase, and the company that proved airlines really can earn a profit -- Southwest -- are all trading at their highest levels in a year.

Polling all Fools, it seems few investors believe any of these companies are in danger of imminent collapse. To the contrary, CAPS members suspect Cummins could go even higher … but not quite as high as Novo Nordisk. That's why this week, we'll be examining….

The bull case for Novo Nordisk
While it lacks the name recognition of Pfizer (NYSE:PFE) or Eli Lilly (NYSE:LLY), this Danish powerhouse simply dominates in one sector of the medical market -- mtinvest calls this one the "World leader in insulin."

Why is that important? CAPS All-Star georcole explains:

With food companies putting more sugar in a lot of our foods, diabetes is going to become a bigger problem than it is today. No matter what the economy does, people will still need to get their insulin and such, and Novo Nordisk is in a great position to capitalize on this unfortunate situation. They have grown at a pretty good clip and are sure to continue into the foreseeable future.

Indeed, fellow All-Star Turbolover wrote in March to inform us of "a movement to LOWER the blood sugar levels considered to be diabetic. This would cast a wider net and a substantially higher percentage of the population would then require treatment."

While none of this is good news for diabetics, it does give investors a chance to profit from the companies that treat this disease. Novo Nordisk derives 73% of its revenue from diabetes care -- and reaps simply huge profits off the business.

A diet rich in profits
The firm generated $2.5 billion in free cash flow from this business in 2009, a 25% free cash flow margin on its revenue. In short, for every $100 in drugs Novo sells, it pockets $25 cash in profit. Analysts expect Novo to keep on growing its profit at better than 16% per year over the next five years, which makes the company's enterprise value-to-free cash flow ratio of 19.2 look, if not exactly cheap, then at least not unconscionably expensive.

In fact, when you tack on the firm's modest 1.9% dividend yield, I'd go so far as to say that the stock looks fairly priced today.

Foolish takeaway
The way I look at it, after gaining 37% over the past year, Novo Nordisk stock is no longer a screaming bargain. But it's not so expensive that it might be headed for a drop. Long story short, I see no reason why this stock must fall.

Disagree? Feel free. If you think Novo Nordisk will crash from its sugar high, here's your chance to tell us why.

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

Novo Nordisk is a Motley Fool Global Gains pick. Pfizer is an Inside Value selection. Chipotle is both a Rule Breakers and a Motley Fool Hidden Gems recommendation, and the Fool owns shares of it.

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