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:
Return on Capital (TTM)
|F5 Networks (NAS: FFIV)||****||$112.42||20.8%|
|MicroStrategy (NAS: MSTR)||***||$121.32||9.7%|
|Terra Nitrogen (NYS: TNH)||*****||$157.16||123.6%|
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 launchpad for your own research and analysis.
The network equipment market has staged a fairly broad rally since summer doldrums sunk the market, with F5 Networks, Aruba Networks, and Acme Packet (NAS: APKT) feeling the market's wrath, their shares going lower over worries about flagging sales growth. It seems the concern was misplaced.
F5 sees its fiscal-first-quarter results coming in in line with expectations, with revenue rising to as much as $320 million and profits ranging from $0.99 to $1.01 per share -- right around where the analysts have pegged results. Aruba also is looking to profit from the proliferation of mobile devices as the need for security across networks helped drive revenues 44% higher last quarter. Even Cisco (NAS: CSCO) , which it seems has been losing market share, was able to put up good numbers in its video and collaboration businesses.
In short, analysts are looking for F5 and other network equipment vendors to continue experiencing steady performance and downplay the conservative outlooks companies are offering. Certainly the CAPS community was already doing that as 93% of those rating the equipment specialist had it outperforming the broad indexes. Add F5 Networks to your watchlist to see if the rally continues.
Not so smart?
Business intelligence software provider MicroStrategy helps companies understand where they're going by studying what they've done. Using proprietary business analytics, MicroStrategy analyzes a business's operations and identifies trends while improving efficiencies. It could have used some of those strategies to understand it was going to miss expectations this past quarter. The stock got socked when it came up short on profits.
Yet it's not only MicroStrategy that was shy of its goal. Pegasystems also had a big miss, with revenues missing analyst expectatons by a wide margin, and Qlik Technologies (NAS: QLIK) , although beating on both the top and bottom lines, offered up a sober assessment of the coming quarter.
Only Qlik has been able to maintain analyst confidence. Both MicroStrategy and Pegasystems saw Wall Street scale back earnings expectations for next quarter. Yet it's also seen as a short-term event, as all three are expected to grow profits next year by large, double-digit percentages with MicroStrategy far outpacing the pack with near-87% growth.
With the business intelligence expert ready to help retailers mine their customers' Facebook relationships with innovative tools being used by the likes of Guess? and others, CAPS member thebraining is expecting MicroStrategy to experience some rapid growth.
Add your thoughts in the comments section below or on the MicroStrategy CAPS page, and put the stock in the Fool's free portfolio tracker to see if it produces up to expectations.
You'd expect the high prices realized for agricultural products this year would have seeded the growth of the fertilizer industry. And while shares of Terra Nitrogen are up 60% this year and CVR Partners (NYS: UAN) rose 40%, they're the exception rather than the rule. CF Industries and Monsanto are up only marginally, while PotashCorp, Agrium, and Scotts Miracle-Gro are all off by double-digit percentages.
With agricultural industry economists expecting higher cost inputs to keep crop prices high in 2012, investors are expecting Terra Nitrogen to continue putting up better than average numbers. It was able to raise production last quarter and achieve higher sales volumes, creating a potent cocktail of higher prices and volumes that saw profits triple year over year. With a healthy dividend currently yielding more than 10%, it is a tasty treat for CAPS members like Chintok, who sees it being insulated from any one market. "Does not depend on US market alone. In good position to profit from expanding food markets needs."
Add Terra Nitrogen to your watchlist and see if it has planted the seeds of growth for years to come.
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 Dupreyowns shares of Cisco Systems, but he holds no other position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Cisco Systems, Guess?, and Qlik Technologies, as well as having created a bull call spread position on Cisco Systems.Motley Fool newsletter serviceshave recommended buying shares of Pegasystems, Acme Packet, Scotts Miracle-Gro, Qlik Technologies, and Cisco Systems, along with creating a synthetic long position in Monsanto and writing covered calls in Guess?. 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.