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:
Stock | CAPS Rating (out of 5) | 3-Digit Price | Return on Capital, TTM |
|---|---|---|---|
Monster Beverage (NAS: MNST) | *** | $106.09 | 31.9% |
Netflix (NAS: NFLX) | ** | $127.88 | 30.6% |
Sources: 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.
Drinking it up
It wasn't a monster quarter for Coca-Cola (NYS: KO) , but with $11 billion in sales, it was still a pretty good one. Revenues were up 5% as volumes grew across the board, particularly in Asia, where various countries experienced double-digit growth. As Coke prepares for various cost-cutting initiatives that will save as much as $400 million annually by 2015, money it will put into brand-building, now might be the time for the soft-drink giant to consider an acquisition of Monster Beverage, which itself is enjoying monster growth.
By purchasing the energy-drink maker, Coke would be able to make huge inroads on the sports drink market currently presided over by PepsiCo's Gatorade brand. Monster's new Rehab drink not only quenches your thirst and rehydrates you like sports drinks do, but it gives you that jolt of energy as well.
Coke's own energy drinks seem otherwise forgettable and have equally innocuous names like "Burn" and "Relentless." Last quarter, Monster energy drinks saw sales double to $500 million with its Rehab line introduced a year ago. Coincidence? I think not. It's also expanding the number of drinks under the brand.
Monster will be splitting its stock next week, so it won't be a three-digit stock for long, but that doesn't mean the value won't still be there. CAPS member FoolSolo is certain its ability to outperform will remain intact.
Unusual pick for me, but the fundamentals are solid. Despite a strong year, I think they will continue to outperform. A bit scary on some of the numbers; P/E > 36, PEG 2.83, P/FCF 24.9, P/B 9.9. But a healthy profit margin, one of the highest ROE in the industry, no debt, and a consistent track record of earnings and sales growth.
Add Monster Beverage to your watchlist to be notified if it has the energy to bring its share price above the century mark once again.
A new star in the firmament
The fallout from Netflix splitting its DVD and streaming content subscriptions continues to permeate the company in new ways. The latest development has Verizon joining forces with DVD rental leader Redbox to offer a service that is essentially the old Netflix business without the mail -- at lower cost.
At least that's the game plan, though details are few at the moment. The announcement calls for Verizon to offer streaming video through its FiOS service while Coinstar's (NAS: CSTR) Redbox will give one rental at a time from its kiosks. Reuters reports that they're planning to do this for around $6 a month.
Although this is potentially a big game-changing event for Netflix, the rivals still have a long road ahead of them before they can roll it out. They'd need to convince movie studios to come on board while also investing heavily in the streaming service. Verizon's already become reticent about rolling out FiOS beyond areas currently targeted for the service, having spent billions upgrading fiber network. That could be why Netflix investors shrugged when the news came out.
Streaming may be the future, but Coinstar's still betting on the DVD, agreeing to acquire NCR's (NYS: NCR) kiosk machines and inventory for $100 million. NCR previously supplied Blockbuster with kiosks for video rentals when it thought to challenge Redbox.
CAPS member Caseman417 says Netflix has mostly recovered from its miscues, so he's expecting it to meet whatever new challenges there are head-on. Review what others have to say on the Netflix CAPS page for more opinions on its future, and add it to the Fool's free portfolio tracker to see who will be the next to try to assail its leadership position.
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 outsize opportunities -- it's completely free.
At the time thisarticle 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 PepsiCo and Coca-Cola.Motley Fool newsletter serviceshave recommended buying shares of Coca-Cola, Netflix, Coinstar, Monster Beverage, and PepsiCo, as well ascreating a diagonal call position in PepsiCo. 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.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
