High-Priced Stocks Worth Every Penny
Penny stocks are one way to double your money, though it's fraught with risk, but there are equally shiny opportunities trading at the other end of the price spectrum, too. I call 'em "three-digit stocks," yet if they're anything like Berkshire Hathaway, they can trade in the four-, five-, and six-digit range, too.
A penny stock might not be a good buy simply because it's cheap, and a three-digit stock shouldn't scare you away just because it carries a hefty price tag. Handsome is as handsome does. Let's check in with the Motley Fool CAPS community to see which of the high-priced stocks below earn the greatest confidence from our investor-intelligence database.
CAPS Rating (out of 5)
Return on Capital, TTM
|Biogen Idec (NAS: BIIB)|
|Green Mountain Coffee Roasters (NAS: GMCR)|
|VF (NYS: VFC)|
Sources: Capital IQ, a division of Standard & Poor's; Motley Fool CAPS.
But just because these stocks are purring, that's no reason to jump into them blindly. Catching a tiger by the tail -- or a knife falling from on high -- can end up leaving you scratched and bleeding. That's why we recommend you use this list as a launch pad for your own research and analysis.
If nothing else, Biogen Idec's second-quarter results confirm what a blockbuster Tysabri is and how important the multiple-sclerosis therapy is to the drug developer. Marketed with pharmaceutical Elan (NYS: ELN) , Tysabri saw sales rise 28% in the quarter and the number of patients enrolled in the drug accelerate, rising to 3,100 patients from 1,800 in the first quarter.
The drug's success clearly separates it from the pack of other treatments, including Copaxone from Teva Pharmaceuticals (NAS: TEVA) and even Novartis' new drug, Gilenya.
It's also highlighting the very real risks of The results also highlight the increasing risks of an investment here.
Biogen is not a one-hit wonder, but Tysabri is quickly becoming the most important brand to the company. Companywide, revenues ticked down $4 million. As the MS drug develops into the primary driver for growth, investors need to remember that any slip-ups, encroachments by other drugs, or failure to maintain velocity will be magnified. When you're reliant upon one drug, one customer, or one supplier for your success, it's a riskier investment than if you're more diversified.
Right now, though, Biogen is enjoying the fruits of its hard work over the years to get Tysabri approved, and the stock is bearing witness to it. And with 91% of the nearly 700 CAPS members who've rated the biotech believing that it will outperform the broad market averages, it seems they're willing to come along for the ride.
Add your own thoughts to the Biogen Idec CAPS page on whether Tysabri's success can prove too much of a good thing.
Sure, Green Mountain Coffee Roasters brewed some excellent quarterly results, but Dunkin' Brandswent public, Starbucks (NAS: SBUX) saw same-store sales bubbling up, and even tiny Coffee Holding perked up 16% yesterday. In short, coffee is hot, and these stocks are riding a caffeine high.
Green Mountain is getting real traction on its single-cup Keurig machines as revenues doubled in the third quarter -- causing profits to triple! Management expects sales to double again in the fourth quarter. This just might be a recurring theme here, since analysts now expect coffee prices to tumble from their record highs.
Arabica prices were down in June, and if Colombia can recover from the heavy rains that destroyed crops there, the market might be flooded with cheap beans. Brazil is expected to increase output by 27% by 2015.
It's just the valuation of Green Mountain's stock that frustrates investors such as highly rated CAPS All-Star chk999. On virtually every metric, the coffee maker's stock trades at nosebleed heights. Yet Green Mountain has managed to confound the critics before, so let us know on the Green Mountain Coffee Roasters CAPS page whether you think it will do so again. If it's too rich for you, add the stock to your watchlist to watch and see whether it can still perk up interest.
A virtual winner
Consumers must be getting inured to inflation, because it's not just higher prices they're willing to pay for coffee, but for apparently for all commodities. Apparel maker VF recently reported better results despite passing along higher cotton prices.
The rising cost of cotton has sunk many a retailer this year. Aeropostale (NYS: ARO) , Gap, and Wet Seal have all been left ragged by rising cotton prices, so maybe they can take a page from VF's playbook. But cotton prices, like coffee, are seen as headed down in the immediate future, so there may be some relief on the way. Importantly for VF, the price increases it implemented could mean even wider margins come the fourth quarter.
CAPS member JunkyG thinks that with brands like premium jeans 7 for All Mankind, and with Timberland soon to come into the fold through a $2 billion buyout, it has a global brand worth paying up for.
Very well integrated and good international business. Strong dividend as well. Should be able to stay ahead and grow in this economy.
Put VF into the Fool's free portfolio tracker and see whether this company is really special, or whether it puts its jeans on one leg at a time like the other apparel companies.
Count to 10
These three-digit stocks might be on their way to even higher valuations. That's why it pays to start your own research in Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page.
At the time this article was published The Motley Fool owns shares of Gap, Aeropostale, Timberland, and Berkshire Hathaway. Motley Fool newsletter services have recommended buying shares of Elan, Novartis, Green Mountain Coffee Roasters, Teva, Berkshire Hathaway, and Starbucks, creating a lurking gator position in Green Mountain Coffee Roasters, and shorting Green Mountain Coffee Roasters. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Rich Duprey owns shares of Aeropostale but has no financial position in any of the other stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.
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