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)
|Mastercard (NYS: MA)||***||$354.55||38.6%|
|W.W. Grainger (NYS: GWW)||***||$174.09||22.2%|
|Wynn Resorts (NAS: WYNN)||*||$112.90||9.8%|
Source: S&P Capital IQ; Motley Fool CAPS. TTM = trailing 12 months.
But just because these stocks are purring is 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.
With government regulation, it's easy to apply the Law of Unintended Consequences from their implementation and see the negative outcomes that accrue. Take the recently enacted debit card fee swipe rule. Intended to relieve small businesses from high fees caused by customers using debit cards to make purchases, the misguided Frank-Dodd Wall Street reform act is now causing retailers to pay higher fees on smaller transactions.
Previously card issuers Visa (NYS: V) and Mastercard would impose relatively small fees on small transactions, processing such payments for just $0.06 or $0.08 each. In the wake of the new law however, and the money they're losing because of it, the card issuers are processing all transactions at the highest $0.21 permitted.
Banks like Bank of America (NYS: BAC) also faced higher costs for issuing debit cards as a result of the law and they started charging fees for their use. After a public backlash that featured politicians directing blame away from themselves -- and really, Bank of America is such a convenient whipping boy -- big banks backed down. The fact remains, though, pandering politicians didn't think through their plans, and these issues are the result. Blaming Bank of America or Mastercard for the problems politicians is simply as misguided as the law itself.
With more than 3,100 CAPS members weighing in and 91% of them rating Mastercard to outperform the market averages, it's clear they think this is just a small hurdle the processing giant will have to step over. Add Mastercard to your watchlist to see if it gets to keep the change.
A golden opportunity
Maintenance, repair, and industrial products leader W.W. Grainger will be closing 25 branches in the U.S. before the end of the year as competition has intensified. Industry peer MSC Industrial Direct (NYS: MSM) has previously noted the sharp pricing environment that's cropped up as the recession's progressed, a factor it attributed to hard-pressed smaller rivals competing on the last thing they have going for them.
That's why they've viewed this market as the best land grab opportunity they've ever seen, and it would suggest they're taking some of that real estate from Grainger, too.
Still, the MRO specialist raised the low end of its full year guidance to $8.85 to $9 a share, compared with $8.80 it previously offered, and expects 2012 earnings to hit a range of $9.90 to $10.65. The midpoint of that is ahead of what analysts are forecasting, even as they've raised their own expectations for next year.
Grainger has been my preferred pick in the space, just ahead of MSC and further along than Fastenal. Over the past year, Grainger's stock gained over 42% compared to just 8% for MSC, but lagging Fastenal, which has appreciated 52%.
Add your thoughts in the comment's section below or on the W.W. Grainger CAPS page, and put it in the Fool's free portfolio tracker to see if it produces up to expectations.
A razor's edge
Macau casino gambling revenues hit a new record last month, rising 42% to $3.4 billion, with visits running 13% higher. It's easy to see why casino operator Wynn Resorts reported strong third quarter results that were driven by its own 42% increase in Macau revenues.
But some analysts are worried that Macau's growth is slowing, and with Las Vegas Sands offering stiff competition, it will lead to tighter results by Wynn. As the only legal place to gamble in China, the many rivals that have piled into Macau have pressured some of their peers, like Melco Crown Entertainment (NAS: MPEL) , which missed analyst expectations by a penny.
Wynn does have a new casino slated to open on the Cotai peninsula, but it's been suffering from delays that have pushed that back as far as 2015.
All of which underscores why CAPS member Jeffrey2012 isn't planning on betting Wynn will make a strong comeback:
This feverish pitch of ever record setting revenues coming from Macau will come to an end sooner rather than later. There is no way that Macau and China is going to continue their hot growth without some sort of issues. In fact, there are signs everywhere from the credit squeeze in Wenzhou to the plummeting stock market. Sooner, rather than later is this going to manifest in these wealthy high rollers who are probably living the high life on shadow banking loans.
Add Wynn Resorts to your watchlist and see if it still has what it takes to be a high stakes roller.
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 Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Bank of America and Mastercard. Motley Fool newsletter services have recommended buying shares of MSC Industrial Direct and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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