True penny stocks are a minefield, but the copper beauties we pick up in my weekly column "Making Cents in Penny Stocks" are often just beaten-down winners whose shares have fallen below the $10 mark.
There are also those companies whose shares trade at the other end of the spectrum. I call 'em "three-digit stocks," though if they're anything like Berkshire Hathaway, they can trade in the four-, five-, and six-digit range, too.
While a penny stock might not be a good buy simply because it's cheap, a three-digit stock shouldn't scare you away just because it carries a hefty price tag. Handsome is as handsome does, so we check in with the Motley Fool CAPS community to see which ones the investor-intelligence database sees as having the best chance of succeeding.
For the first 20 months after we began tracking CAPS data, we found that newly minted five-star stocks offered the best opportunities for investors, while lowest-rated companies fared the worst. Pairing that information with our high-priced highfliers below, we'll have the beginnings of an idea of whether these stocks can maintain their lofty valuations.
|
Stock
|
3-Digit Price
|
CAPS Rating
|
Return on Capital, TTM
|
|
Alleghany (NYSE: Y )
|
$302.05
|
****
|
5.9%
|
|
CME Group (NYSE: CME )
|
$222.55
|
*****
|
5%
|
|
Mitsui & Co. (Nasdaq: MITSY )
|
$196.26
|
****
|
5%
|
|
Terra Nitrogen (NYSE: TNH )
|
$104.78
|
****
|
138.1%
|
|
Capital Southwest (Nasdaq: CSWC )
|
$103.99
|
***
|
0.3%
|
Source: Capital IQ, a division of Standard & Poor's, and CAPS. TTM = trailing 12 months.
High-falutin' honeys
Investor concern about the economy has apparently been showing up in the volume activity on some exchanges. Nasdaq OMX Group (Nasdaq: NDAQ ) , for example, saw its average daily value volume off 12% in November (though the number of trades executed rose 54% from last year). Stock and commodity exchange CME Group also showed lower volumes, with trading volume down 28% in November along with a 16% decline in the number of contracts traded per day.
CAPS member JFkeiko figures that's to be expected since he considers CME to be a bull market exchange that will rebound when investor sentiment turns.
This stock will explode to the upside as soon as the financial/housing crisis dies down ...This is a bull market stock, so when the bulls show their strength again ... look out.
One argument investors have used in supporting agricultural companies like PotashCorp (NYSE: POT ) is that people aren't going to be eating any less, regardless of the economy. Fertilizer is still going to be needed for crops. As incomes rise in places like China, demand for food products is also increasing, and that has some countries like Japan expecting a dangerous rise in food costs. With recession spreading and credit risks on the rise, some investors believe that farmers are likely to cut back production.
Mitsui & Co., Japan's second-largest trading company, is seeking to ameliorate that possibility by taking larger stakes in a number of foreign farmers to ensure sufficient supply. Top-rated CAPS All-Star InsiderTrading felt Mitsui was an excellent, underpriced stock back in October when it was trading at somewhat higher prices.
Excellent stock with a great looking P/E Ratio of 5... A commodities based stock at 2006 lows with great growth this year, in my opinion it looks heavily oversold at this price.
That may have also fed doubt investors like CAPS All-Star Entrepreneur58 had about commodities in general and another fertilizer supplier Terra Nitrogen, in particular.
This stock is still holding up around $90 despite the fact that ag commodities have crashed along with everything else. This one could fall back close to $20 again assuming they whack the dividend and lower earnings projections.
Count to 10
These three-digit stocks might be on their way to even higher valuations, or not. That's why it pays to start your own research on these stocks on 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.
Sign up today for the completely free service and let's us hear what you have to say about the great and almost great companies that interest you.
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