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. 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:
CME Group (NAS: CME)
IBM (NYS: IBM)
Intuitive Surgical (NAS: ISRG)
Source: S&P Capital IQ; Motley Fool CAPS. NA = not available. 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.
We get closer and closer to having one giant conglomeration of exchanges as CME Group looks to merge the Standard & Poor's indexing business from McGraw-Hill with its own Dow Jones indexes. The move, which could impact CBOE Holdings' (NAS: CBOE) business, since about one-third of its revenues come from contracts related to the indexes, actually received the blessing of a CBOE executive last week, who said CBOE saw "nothing but positives" from the deal.
It would be a nice coup for CME, and a nice profitable revenue source for it. The S&P segment generated $480 million for McGraw-Hill last quarter, just over 30% of its $1.58 billion in revenues, but it accounted for almost 60% of its operating profit with margins of 44%.
Analysts are bullish on its outlook, with only one of 15 thinking it can't beat the market averages, and 94% of the CAPS community members weighing in on the exchange are just as positive it can. Share your thoughts on the CME Group CAPS page, then put it on your watchlist to keep track of its progress.
Ever since it sold its computer business nearly seven years ago to Lenovo, IBM has transformed itself into a premier computer services outfit. It went from losing money by selling PCs to generating high margins consulting with businesses over their computer usage. Of course, IBM is much more than a consultant, as its recent purchase of cluster computing specialist Platform Computing shows.
Clustering helps servers manage "clusters" of computers to operate as a unified machine that can take on large calculation jobs beyond the capability of any one server. The acquisition will further cement IBM's lead in the supercomputer world. According to the market researchers at IDC, IBM leads Hewlett-Packard (NYS: HPQ) in the number of overall servers, though HP was well ahead of its rival in industry standard x86 servers, with a 38% share of the market. Dell (NAS: DELL) was second with 21% and IBM came in third at 19%.
There's a reason IBM is known as Big Blue, and CAPS member pchop123 sees the supercomputing giant as the bluest of the blue chips, that still has lots of growth potential. Chip in on the comments section below or on the IBM CAPS page on whether this is still a super investment, and add it to your watchlist to see where it goes.
Under the knife
Investors understand that robotic surgery specialist Intuitive Surgical has transformed the way doctors perform surgery, but in the event they don't fully appreciate the extent to which the device transfers the surgeon's gestures into movement by the robotic arms, check out this video of a Da Vinci system peeling a grape.
Although system-sales revenue continues to grow -- up 11% from the year ago-period -- the real driver here are the number of procedures being performed, and not just on grapes. Services revenues jumped 22% year over year while instruments and accessories, which are driven by the number of procedures, soared 35% from 2010.
Intuitive Surgical has blazed the trail in robotic surgery, allowing Hansen Medical to excel in robotic catheters, MAKO Surgical (NAS: MAKO) in robotic knee replacement, and Accuray in surgical procedures.
CAPS member ejroxy believes Intuitive Surgical has two powerful forces behind it, being in the medical field and introducing robotics to it. "Two top growing industries like these two will explode leaving a ripple effect"
Using surgical precision, give us your views on the Intuitive Surgical CAPS page, then add the stock to the Fool's free portfolio tracker to see if it will slice through the fog to higher growth.
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 International Business Machines and Berkshire Hathaway. Motley Fool newsletter services have recommended buying shares of Intuitive Surgical, Berkshire Hathaway, MAKO Surgical, and Dell. 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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