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 Warren Buffett's investment vehicle, they can trade with more digits, 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:
Return on Capital (TTM)
|Baidu.com (NAS: BIDU)||**||$127.72||39.2%|
|Deckers Outdoor (NAS: DECK)||***||$100.54||23.9%|
|priceline.com (NAS: PCLN)||**||$511.12||27.5%|
Source: Capital IQ (a division of Standard & Poor's), 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.
Last month I warned that investors needed to be aware of the risks involved in Chinese companies like Baidu, Sina (NAS: SINA) , and 21Vianet Group that were structured as variable interest entities, or VIEs, which allow foreign ownership in certain otherwise-prohibited industries. The Chinese government has thus far looked the other way, but closer scrutiny was a growing possibility.
Then just a week or so ago, Reuters reported that China's securities regulator asked the government to clamp down on VIEs, though nothing official has yet been announced. The news sent shares of Baidu, Sina, and Sohu.com (NAS: SOHU) plummeting as it represents a threat to the way they do business and attract investments.
Yet, if other rumors are true, the new lower share prices could be an optimal buy-in point. Other commentators cited at least one executive indicating that the VIE crackdown would grandfather existing VIE structures while putting under the microscope any that came after. But whether a two-tiered structure could be workable remains to be seen.
The Chinese search giant still has its supporters, like CAPS member sherriecherry, who appreciates its market dominance: "Baidu is the Google of China, expecially now that Google has left China. It is the number one search engine used in China."
Add your own thoughts on the Baidu CAPS page and add the stock to your watchlist to see if it can vie for greater growth.
Walking the triple-digit walk
While Crocs (NAS: CROX) bulls might say it's about time the idea was put to rest, the shoemaker is officially no longer a fad, as the various models of stylish and fashionable footwear it produces have left behind its signature plastic shoe (though it does still sell it).
Similarly, even though Deckers Outdoor is still heavily reliant upon its iconic Ugg boot for half its sales, there are many iterations of the fleece-lined footwear that go beyond the one style it was so well known for. And, important for future growth, its Teva brand continues to take on greater importance, accounting for a quarter of its revenues all on its own, as it has gone beyond its original sandals.
They reported a $0.19 loss for the quarter, but that was expected due to a new subsidiary model adopted by Decker. Next year, earnings growth should show some healthy growth. The markets downturn gives investors a chance to buy them much cheaper.
Walk over to the Deckers Outdoor CAPS page and tell us whether it will kick it into overdrive, then watch its progress by adding the stock to the Fool's free portfolio tracker.
Still flying high
During the last recession (did we ever really get out of it?), name-your-own-price travel agent priceline.com excelled because it provided consumers with an outlet to find discounted fares and rooms. Although it might seem counterintuitive at first, since consumers seemingly had less cash to go anywhere, travel did not come to a halt. If people had to go, then they wanted the best price around.
The new recession we're running pell-mell into might not offer the same opportunities, though, since structural rivals like Expedia and Orbitz Worldwide have positioned themselves as equals to Priceline, taking measures such as eliminating added fees that held them back as they transitioned last time. Moreover, there's a new player on the block: Google (NAS: GOOG) .
Google's new travel services might not be all that yet, but the company has the potential to become a potent player in the field. With its position as the search leader already cemented, the convenience its travel booking will offer will make it a hardy contender. But these days, Priceline's biggest growth lines are international, where subsidiaries Agoda and Booking.com are experiencing phenomenal expansion.
While almost three-quarters of CAPS members rating the OTA believe it will beat the market averages, it has never really been able to rise above its low two-star rating, suggesting that members can't get a handle on how it continues to grow.
Put Priceline in the Fool's free portfolio tracker and let us know in the comments section below or on the priceline.com CAPS page if you see it taking off.
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 Google. Motley Fool newsletter services have recommended buying shares of Sina, Google, Sohu.com, Deckers Outdoor, priceline.com, and Baidu.com. 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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