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
Baidu.com (NAS: BIDU)
Caterpillar (NYS: CAT)
Source: S&P Capital IQ, Motley Fool CAPS.
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.
Searching for value
Without question -- and without a real challenge from the true market leader, Google (NAS: GOOG) -- Baidu.com is far and away the top Chinese search engine, which continues to gain market share and bolster its bottom line with contextual and display advertising, along with a variety of search-related and search-driven content. According to the Web analytics site Alexa, Baidu is the most visited site in China, and the fifth most popular in the world (Google is No. 1).
Of course, the 800-pound gorilla in the room is the Chinese government's control and regulation of what its people can see and read. It cracked down on dissent again last week and shut down two political websites that had the temerity to criticize the government. We can only imagine what the process of "rectification" the sites are undergoing as a result of the crackdown, or what the executives will endure. Both SINA (NAS: SINA) and Tencent also had the functionality of their microblogging websites closed off temporarily last week, but such is the risk of doing business in the tightly controlled society. Baidu understands this and hews to the government edicts, though whether that should engender investor support is another matter.
Yet without any meaningful competition permitted, it will be hard for anyone to assail its growth prospects and CAPS member philomore thinks anyone who tries will come up short:
Will someone compete with Baidu for China's search market? Probably. Will they succeed? Not likely. Google's early missteps could prove unrecoverable as millions of new users grow more familiar with Baidu every day.
Add Baidu to your watchlist and then search for other reasons to buy into this stock on the Baidu.com CAPS page or let us know in the comments section below whether you'd support this investment.
Constructing a new future
And it was the bet that China would continue bailing out the world's economies that contributed to heavy machinery maker Caterpillar raising its full-year guidance recently. It expects economic growth of 8.5% there with robust sales occurring elsewhere in Asia. Excluding the acquisition of Bucyrus, Cat's revenues were up 32% year over year in the Asia/Pacific region. Joy Global (NYS: JOY) is also expanding on its already sizable presence there as well to capture part of the country's seemingly insatiable appetite for growth.
Yet fears of a sharp correction in China mean it could be the U.S. markets being the real engine that drives Caterpillar forward, a situation it no doubt recognizes. That explains the heavy investments it's making here, with $2 billion in domestic capital expenditures planned for 2012.
This global broad-based plan is attracting investor attention, too. Motley Fool blogger Helen Hagan writes that Cat's slow and steady pace here and abroad has generated returns and yields ahead of the competition.
Sales and income have been rising steadily which means that the company has enough working capital to maintain sufficient liquidity. Thus, the risk involved with this investment is not very high. Management handles debt well, and consequently the stock is not volatile.
Nearly 5,800 CAPS members have dug in to the heavy equipment operator's prospects, and 94% believe it will outperform the market. Put Caterpillar in the Fool's free portfolio tracker to see the next mountain it climbs.
Count to 10
Caterpillar is not the only U.S. company set to take on emerging markets. Check out The Motley Fool's free report "3 American Companies Set to Dominate the World" 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 Berkshire Hathaway, Google, and Joy Global.Motley Fool newsletter serviceshave recommended buying shares of Berkshire Hathaway, SINA, Google, and Baidu. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.