High-Priced Stocks Worth Every Penny

Penny stocks are one way to double your money, but that approach is fraught with risk. However, there are equally shiny opportunities trading at the other end of the price spectrum. 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.

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

Cummins (NYSE: CMI  )

****

$105.03

14.5%

Panera Bread (Nasdaq: PNRA  )

**

$106.05

19.6%

Wesco Financial (NYSE: WSC  )

****

$366.00

2.2%

Source: Capital IQ, a division of Standard & Poor's; 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.

Highfalutin' honeys
Perhaps best known as a builder of truck engines for the likes of Ford (NYSE: F  ) and Chrysler's Dodge Ram series of pickups, Cummins also manufactures heavy-duty diesel engines that should continue to drive profit home. According to the market researchers at FTR Associates, net Class 8 truck orders surged 38% in November from the month before, marking the fourth straight month of increasing orders. The industry's recovery began earlier this year, and while analysts are still cautious about the breadth of that turnaround, investors should feel comfortable that Cummins, which owns 43% of the big-rig engine market, is working hard enough to grow.

Shares of the engine maker's stock have more than doubled in 2010, rocketing ahead of the gains made by other heavy equipment manufacturers such as Caterpillar (NYSE: CAT  ) and Deere, whose stocks haven't risen by even half as much.

CAPS All-Star StarWitchDoctor isn't concerned that Cummins came in light on analyst expectations last quarter, since it also increased operating profit guidance for the full fiscal year:

OK, So cummins missed the streets numbers. They have a moat around the industry. They are large cap.

You can let us know in the comments section below or on the Cummins CAPS page whether that's a big enough hole to drive a truck through.

Half-baked or full of dough?
Throughout the recession, we heard plenty about the value that a meal at fast-food chains like McDonald's offered, and why Mickey D's stock was thus able to rise from $50 during the depths of the recession to around $80 today. At the other end of the food chain, many full-service restaurants had to turn to online reservation operator OpenTable (Nasdaq: OPEN  ) to help counteract the dearth of customer traffic.

Even with so much attention focused on both extremes, fast-casual chains like Panera Bread and Chipotle Mexican Grill (NYSE: CMG  ) were still able to gain a seat at the table. Panera's stock is up 58% year to date (and 43% alone since the recent August lows), while Chipotle has risen an incredible 170%.

CAPS member echeverria thinks Panera's big run-up means the chain is ready to pull back, but All-Star BoiseKen sees plenty of room for it to go higher still:

Really long runway of growth ahead. Great balance sheet and cashflow. Really quality organization with a decent p/e of under 30 for this type of story.

To keep on eye on whether Panera Bread will rise some more, you can add it to your watchlist,  and have all the Foolish news and analysis compiled for you in a single place for review.

Triple-digit titans
It's no great surprise that Wesco Financial is a three-digit stock: Charlie Munger runs the ship, it's 80% owned by Berkshire Hathaway subsidiary Blue Chip Stamps, and Berkshire's made a $500 million bid to acquire the remaining 20% it doesn't already own. While Wesco has hired the white-shoe crowd at Skadden Arps to advise it on the offer, it really becomes a matter of when -- not whether -- Wesco becomes wholly owned by Berkshire.

Wesco's pedigree undoubtedly helps explain in large part why 93% of CAPS members rating the insurer thought it would outperform the market. Tell us on the Wesco Financial CAPS page if this cozy relationship will really be to its advantage.

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.

Berkshire Hathaway is a Motley Fool Inside Value recommendation. Chipotle and OpenTable are Rule Breakers selections. Berkshire Hathaway, Ford Motor, and Panera are Stock Advisor picks. Chipotle is a Motley Fool Hidden Gems choice. The Fool owns shares of Berkshire Hathaway and Chipotle. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 13, 2010, at 9:21 PM, baldheadeddork wrote:

    Can you guys pass a note around so you don't keep writing that Cummins makes engines for Ford? It shows up in every piece on CMI and it's embarrassingly wrong.

    Cummins has never had anything to do with Ford diesel engines. Ford used to have a partnership on truck diesel engines with Navistar, but their current engine is 100% Ford. Ford passenger car diesels in the European markets are in-house or a joint venture with Citroen.

  • Report this Comment On December 14, 2010, at 10:41 AM, TMFCop wrote:

    baldheadeddork,

    I think you misread the article. I said Cummins makes Ford truck engines (and engines for Dodge Ram pickups), and they also make diesel engines. I didn't say they make Ford diesel engine.

    Thanks for reading.

    Rich

  • Report this Comment On December 14, 2010, at 7:48 PM, baldheadeddork wrote:

    Thanks for clarifying, but that's wrong, too.

    Ford's medium and heavy-duty truck business was sold in 1997 and rebranded as Sterling, which is now owned by Daimler. The largest truck Ford has built in the last 13 years is the F-series Super Duty, and it has never been powered by a Cummins engine.

    Ford F-series gas engines have never been outsourced to Cummins or anyone else. The Cleveland plant makes the new V6 and EcoBoost V6 for the F-series, the Windsor plant makes the new Coyote 5.0 V8 (which also goes into the Mustang GT), and the 6.2 V8 is built at the Romeo (MI) Engine Plant.

    In the last generation of trucks, production of the 3.7V6, 4.6/5.4 V8's and the V10 were split between these same plants. The Ranger engines come from Dearborn and Lima, Ohio.

    Which engines did you think were built by Cummins?

  • Report this Comment On December 15, 2010, at 6:20 AM, TMFCop wrote:

    I'll admit to not knowing specifically which truck engines Cummins builds for Ford, but the company itself says Ford is one of its primary customers for heavy- and medium-duty truck engines.

    Page 5 of its 10-K report:

    "The principal customers of our heavy- and medium-duty truck engines include truck manufacturers, such as PACCAR, Volvo Trucks North America, Daimler Trucks North America, Ford and Volkswagen AG."

    They say those 6 are its biggest customers and account for 22% of its revenues (though PACCAR, because of its prominence in the filing, seems like the biggest).

    Rich

  • Report this Comment On December 15, 2010, at 11:28 AM, baldheadeddork wrote:

    I have to confess that I made a mistake. Ford does still have two medium duty trucks in production that use Cummins engines - the F650 and F750. I haven't seen them in years, Ford only lists them deep in their website and there (literally) isn't a word about them in Ford's 2009 annual report.

    But Cummins use of this to call Ford "one of its principal customers" is either hugely misleading by Cummins, or a sign that they're a very, very small business.

    Through November, Ford had sold 3,071 heavy trucks, which might include the some or all of the F-350/450/550. (And sales are down 25% from 2009 - yikes.) Sales of the Cummins-equipped 650 and 750 account for at most 3,000 units this year, and possibly a lot less depending on what Ford folds into its heavy truck category.

    In Brazil, Venezuela and Argentina, Ford does use Cummins engines in its Cargo series commercial trucks. But like the US, Ford is a minor player in these markets. MAN bought the market share lead when it acquired Volkswagen's South American truck operations, Daimler is a major player, and Paccar's DAF is growing very fast.

    I'll admit I was wrong about Cummins not selling any engines to Ford, but for Cummins to portray a few thousand units a year worldwide as a "principal customer" is BS.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1398807, ~/Articles/ArticleHandler.aspx, 9/30/2014 6:44:58 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement