Rocket Stock or Dud?

"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.

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 upward.

Problem is, if the price goes up too much, even a great company can turn into a lousy investment. Below I list five stocks that may have done just that. Stocks that, according to the smart folks at finviz.com, have more than doubled since the beginning of this year, and just might be ripe to fall back to Earth.

Companies are selected by screening for 100% and higher price appreciation, year to date, on finviz.com.
Current pricing provided by Yahoo! Finance.
CAPS ratings from Motley Fool CAPS.

Las Vegas Sands, Sears Holdings, Starbucks -- each of these stocks has enjoyed remarkable gains this year. Why, despite the "great recession" and all that it implies for consumer spending, even Ford has more than tripled in value.

Such runs have done wonders for shareholder portfolios, but they're also giving rise to a certain level of nervousness among shareholders. You can see the result in the ratings that Motley Fool CAPS' 135,000-plus investors assign to these stocks, here at the peak -- only one gets bullish stars. Surprisingly, this company is a car maker:

The bull case for Tata Motors 

• CAPS All-Star pigwings6 keeps the bull thesis on Tata short and sweet: "Cheap cars for a growing capitalist society."
  
  
• 'Nuff said? Not quite? OK, then let's let coxfina expand on that a bit: "Foreign markets will outperform the S&P 500 and with India resuming its skyrocketing GDP growth, 1 billion Indians + extremely cheap basic cars = solid market presence over the next 5 years."
  
  
• Now there's a blast from the past! The old "BRIC will change the world" argument! And here, there may be something to it. Another of CAPS' uber-investors, go4buffs, points out that: "With all car companies trying to expand in emerging markets like India and China, TTM is playing on its home turf in India and is best positioned to win there ... and keep out the (mostly bankrupt) foreign companies. Once the economy picks up and confidence increases ... increased wages will be spent on 'luxury' items."

Bankrupt foreign companies, eh? I think he's talking to you, GM. Fact is, both Toyota (NYSE:TM) and Honda (NYSE:HMC) also have a large presence in India, and these two are far from "bankrupt."

One thing these companies don't have -- and Tata does have -- is the cheapest car in the world. At $2,500 a pop, the Tata Nano is certain to increase Tata's 12.5% share of the huge Indian consumer market. And seeing as the company already boasts a 67% share of the commercial market, well, the bull thesis here is clear.

Profits are another thing Tata has that most of its rivals lack. Last year, Tata earned $210 million on $5.9 billion in revenue -- a 3.5% net profit margin. While that may sound low, it's actually pretty good for an automaker. And while it puts the company at a pricey-sounding price-to-earnings ratio of 21, that's actually quite a nice price for a company that Wall Street expects to grow at 35% per year over the next five years.

Time to chime in
High growth, high risk, high reward -- these three things seem to define Tata Motors as it surges into the 21st century, disrupting the global auto industry and putting the lie to the idea that a car must cost $25,000 and up. But if this company truly can grow at 35% over the long term, then Tata could deliver some truly bodacious profits.

Or so says me. What say ye? Head over to CAPS now, and tell us what you think.

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