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
|Biglari Holdings (NYS: BH)|
|Randgold Resources (NAS: GOLD)|
|Simon Property Group (NYS: SPG)|
Sources: S&P Capital IQ, Motley Fool CAPS.
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.
A yummy deal?
Would the relative success of Biglari Holdings as operator of the Steak n Shake restaurant chain transfer as easily to Cracker Barrel (NAS: CBRL) , a Southern comfort food chain the budding Berkshire clone seeks to take over? While the chairman of Biglari would answer in the affirmative -- and would explain why he's taken an almost 10% stake in Cracker Barrel (and has asked for regulatory permission to acquire almost half the company) -- the latter would suggest he has ulterior motives that don't extend to protecting all shareholders' interests.
After at times being an accommodating relationship, it's turning into something of a bitter fight, with Cracker Barrel finally adopting a poison pill defense to keep Biglari from building up a larger stake or gaining a seat on the board of directors. Having someone from a competing chain of family restaurants sitting on the board would serve up conflicts of interest.
Highly rated CAPS All-Star kkconway thinks Biglari knows restaurants regardless, and investors will find just as much steak as sizzle with the stock: "Biglari knows the restaurant biz; has a stake in his steaks, ha ha."
Share your thoughts on the Biglari Holdings CAPS page on whether it will be successful in gaining the seat, then put it on your watchlist to keep track of its progress.
A golden opportunity
Considering the Greek bailout is anything but certain and Italy could be the next crisis hotspot as Prime Minister Berlusconi is set to resign, it's no surprise that gold is on the march higher again. While that means familiar names like Goldcorp (NYS: GG) and Yamana Gold will likely be moving north too, other gold miners like Randgold Resources are poised to rally as well.
Randgold is looking to boost production 22% next year and is targeting annual output of 1.2 million ounces by 2015 after production starts at its Kibali mine in the Congo by 2013. Although rising gold prices will benefit just about all gold miners, at $747, Randgold does have higher cash costs per ounce than some of its peers. It's not necessarily fair to make a sequential comparison of the costs, though, since the second quarter featured a unique sale that skewed results. Yet even though year-over-year costs grew as well, production levels also rose sharply, and growth in prices received has outstripped those higher costs.
CAPS member StockDocStan says these are the times when investors should be buying gold miners like Randgold: "It's time to buy the miners, who can leverage gold at anything over $800/oz. into spectacular earnings growth for many years to come, and Rangold will be one of, if not the, fastest earnings grower over the next 5 years."
Invest your thoughts in the comments section below, or on the Randgold Resources CAPS page, and add it to your watchlist to see if it produces up to expectations.
Rage against the Internet
The myopic arguments of Internet sales tax proponents is on display in the lawsuit filed by Simon Property Group, which is seeking to force Indiana to collect sales taxes on Amazon.com (NAS: AMZN) to "benefit all of Indiana's taxpayers and the state's brick-and-mortar retailers." As the e-commerce giant has shown its propensity to do when faced with the tax, it closes down its affiliate programs in the state, harming lots of small-business owners. What the mall operator is doing is trying to protect the interests of its tenants.
Simon reported third-quarter results that saw occupancy rates tick up as comparable sales increased 9% to $517 per square foot, and average rent per square foot rose 3%. Funds from operations jumped to $1.71 a share, beating analyst expectations by $0.05. With expansion under way internationally in Japan, Simon Property Group is seeing improved conditions leading to solid results. Not all mall-based REITs have done well, however. While Simon is up 29% this year and Taubman Centers rose 22%, General Growth Properties (NYS: GGP) is off 7%, and Resource Capital is down 20%.
Yet just 40% of the CAPS members rating Simon Property Group think it will continue to beat the broad indexes, so add the REIT to the Fool's free portfolio tracker to see whether it can continue its recovery, and tell us on the Simon Property Group CAPS page whether you think pushing for the Internet sales tax is in its best interest.
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 contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Berkshire Hathaway and Biglari Holdings.Motley Fool newsletter serviceshave recommended buying shares of Berkshire Hathaway and Amazon.com. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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