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:
Return on Capital (TTM)
|CF Industries (NYS: CF)||*****||$157.99||23.0%|
|Visa (NYS: V)||****||$100.71||13.3%|
Source: 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.
Fertile ground for profits
Maybe we haven't seen what winter has to throw at us yet, but fertilizer producers are looking toward the spring planting season to prop up pricing. Mosaic, the world's largest producer of phosphates, says prices have reached bottom as grain prices are rallying, which is undoubtedly good news for CF Industries and PotashCorp (NYS: POT) , big producers of nitrogen and potash, respectively -- the other two key fertilizers that farmers deploy in growing their crops.
The global financial situation has worried producers because it has dampened demand, but the mild winter we've been enjoying is also cause for concern because farmers need the moisture the snows bring to their fields. Warm temperatures also lead to more insects in the spring. It could be a boon for Monsanto (NYS: MON) , though, as its bug- and disease-resistant seeds would be in greater demand.
Perhaps CF sprinkled some fertilizer on its operations, because CAPS member dreamjob believes its cash-generating prowess will yield a bumper crop of profits:
Management is generating cash for the owners of this company, and cash returns on investments are very good. Earnings quality is solid (FCF out-pacing NI), and sales and earnings are growing very nicely (earnings is actually growing faster than sales). To top it off, this is selling at an outstanding price right now.
Add CF Industries to your watchlist to see if a winter cold snap leads to the stock price warming up even more.
Where people spend money
The market researchers at comScore said online Christmas shopping sizzled, up 15% from 2010. While retail in general posted a middling 4.5% increase in sales, it was the online niche that really boomed. Forrester Research says online sales probably totaled $197 billion in 2011. Although Visa and MasterCard will benefit regardless of where shoppers spend their money, online retail is really where everyone is training their sights.
eBay (NAS: EBAY) is now a ward of PayPal's state, as the transaction middleman is growing at an annual 25% annual pace and accounts for 40% of the auction site's revenues. Yet with Google also getting into the payments business and banks that issue credit cards making a splash, investors would probably do well to focus on those established players that can ease a shopper's concerns over identity theft. As mobile communications broadens its reach, consumers using their phones in place of their wallets means Visa's opportunities -- and risks -- expand exponentially.
CAPS member tywebb1989 finds the transaction processor gathering all the strings into its hands: "Tremendous brand, international expansion, relatively immune from economic downturn, very little exposure on their balance sheet"
Add your thoughts in the comments section below or on the Visa CAPS page, and put it in the Fool's free portfolio tracker to see if anyone can threaten its dominant position in transactions.
Count to 10
These three-digit stocks might be on their way to even higher valuations, but the smartphone revolution has the potential to upset everyone's game plan. Check out The Motley Fool's free report "3 Hidden Winners of the iPhone, iPad, and Android Revolution" and get access to detailed analysis of these outsized opportunities -- it's completely free.
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 Google, MasterCard, Berkshire Hathaway, and CF Industries Holdings.Motley Fool newsletter serviceshave recommended buying shares of Berkshire Hathaway, eBay, Visa, and Google, as well as writing puts in eBay and creating a synthetic long position in Monsanto. 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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