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 following high-priced stocks earn the greatest confidence from our investor-intelligence database:
CAPS Rating (out of 5)
Return on Capital, TTM
|Chevron (NYS: CVX)||****||$105.53||17.1%|
|Goldman Sachs (NYS: GS)||***||$102.09||NA|
|Goodrich (NYS: GR)||***||$122.60||12.5%|
Sources: S&P Capital IQ; Motley Fool CAPS. NA = not available.
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.
During an economic recession where unemployment remains stubbornly high, removing incentives for people to create jobs and wealth would seem to be the last thing you want to do, argue oil executives. However, some members of the deficit reduction supercommittee want to remove tax credits enjoyed by their very companies.
Oil giant Chevron says the politics of envy causes the industry to be targeted because of its success even though other industries receive similar breaks. What would really be beneficial, Chevron's CEO said, would be for more permitting for onshore and offshore drilling. That will create new jobs and increase revenues.
Royal Dutch Shell (NYS: RDS.A) would likely agree. It's noted in the past it spent billions by federal leases in Alaska in 2008 only to be stymied by burdensome regulation and foot-dragging. Chevron contrasted its position to that of Apple:
"Apple earns about what we earn, but Apple has profit margins two times Chevron's, and an effective tax rate one-third less, about 28%. Yet we don't hear calls for tax increases on Apple or the tech sector."
As ludicrous as tax and regulatory policy can be, analysts remain bullish on its outlook, with more than two dozen unanimously agreeing that Chevron will still be able beat the market averages. Share your thoughts on the Chevron CAPS page on whether it will be successful in influencing the committee report, and then put it on your watchlist to keep track of its progress.
If any company is the epitome of the OccupyWallStreet crowd's ire, it would be investment house Goldman Sachs, which often finds itself in the middle of the most controversial deals made on Wall Street, sometimes on both sides of them.
The merger of El Paso (NYS: EP) and Kinder Morgan is a case in point, where a shareholder is suing it because it guided El Paso's directors to accept a lower price to get the deal done because Goldman would earn less from a spinoff as was being contemplated. Moreover, it owns a 20% stake in Kinder Morgan.
Highlighting another conflict of interest, the investment house not only trades in aluminum, but also owns vast aluminum warehousing facilities that profit from limiting its release into the market. Even though aluminum prices are low and production is high, there's a shortage on the market because of restrictions on releasing it to customers.
But not all that's Goldman glitters. It just reported a third-quarter loss as global financial markets were spun into turmoil, but then again JPMorgan Chase, Bank of America (NYS: BAC) , and Morgan Stanley (NYS: MS) also reported less than stellar results. There aren't many who think Goldman will come out on the losing end for very long, and the way CAPS member weiwentg sees it: "These guys are the vampire squid sitting on the face of humanity-if I can't beat them, I join them."
Invest your thoughts in on the comments section below or on the Goldman Sachs CAPS page on whether this is still a super investment, and add it to your watchlist to see if it bounces back next quarter.
A razor's edge
There's a reason investors are feeling good about Goodrich, since United Technologies (NYS: UTX) agreed to buy it out in an $18 billion deal. Its stock quickly ran up from the $80 level to its current highs of $122 a share. While Goodrich was expected to increase profits by 33% on 16% growth in revenues this year, United saw its own profits jump 13% from the year ago period on sales of nearly $15 billion that were up 9%.
United Sikorsky helicopter unit saw increased demand as support for armed personnel in Afghanistan and Iraq helped beef up numbers, but with Libyan strongman Moammar Qaddafi dead and President Obama hastening the U.S.'s exit out of Iraq, there might be some softness in future periods.
Add the parts maker to the Fool's free portfolio tracker to see whether the deal gets done, and tell us on the Goodrich CAPS page whether you'll be buying United Technologies' shares with the money you'll receive.
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. Check out hisholdings an a short bio. The Motley Fool owns shares of Berkshire Hathaway, Apple, Bank of America, and JPMorgan Chase.Motley Fool newsletter serviceshave recommended buying shares of Berkshire Hathaway, Chevron, and Apple and creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't 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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