Penny stocks are one way to double your money, albeit one 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.
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:
(out of 5)
Return on Capital (TTM)
|Chipotle Mexican Grill (NYSE: CMG )
|First Solar (Nasdaq: FSLR )
|IBM (NYSE: IBM )
Source: Capital IQ, a division of Standard & Poor's; 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 launch pad for your own research and analysis.
If Wal-Mart U.S. CEO Bill Simon is right, and the U.S. is in for some harsh inflation reality, not only will the retail giant see its bottom line pinched, but food companies from the consumer goods side of the market to the retail side, like Chipotle Mexican Grill and Panera Bread (Nasdaq: PNRA ) , will also have to deal with the higher costs.
While companies will pass along a good percentage of the increases to their customers, they're going to have to eat a certain portion of the higher prices if they want to maintain their sales. Wheat and corn prices are soaring as global food prices hit record levels in February. On its last conference call, Chipotle admitted that costs so far this year are ahead of 2010, and shortages of corn supply will add to its inflationary pressures. The company also had to deal with the extra-cold winter that hit tomato and pepper crops in Mexico and Florida.
Even though inflation will pressure margins, it's an industrywide issue, so it shouldn't put the fast-casual chain at a competitive disadvantage. Yet a lot of CAPS members, like buffalonate, balk at Chipotle's valuation, though sholomar thinks there's plenty of room for expansion that could justify the high price tag.
Add your own opinion to the Chipotle Mexican Grill CAPS page and tell us if you believe this stock is just too hot to handle.
In exchange for what?
Fools don't normally put much credence in following insider sales. Like Peter Lynch, they prefer to watch when those insiders buy. Yet when a company chairman dumps half his personal holdings, as First Solar's Michael Ahearn did last month, it ought to give you pause. Plenty of other insiders have been selling their shares on the open market right alongside him, too.
Solar power companies have rallied since Japan's nuclear reactor disaster. Yingli Green Energy (NYSE: YGE ) is up 13%, First Solar is 10% higher, and Trina Solar (NYSE: TSL ) has advanced 8%. Analyst Gordon Johnson, the solar specialist at Axiom Capital, thinks the run-up is unwarranted, since solar can't replace nuclear power, and there are industry trends that point to an "acute correction lower."
While solar might not be a one-to-one replacement for nuclear, CAPS members like jalondon3 think the crisis in Japan will spur more investment in the industry:
Solar technology is only going to get better and cheaper making it more and more of a green energy option. Govts around the world will be looking for ways to make their power capabilities greener in light of Japan's Nuclear disaster.
Although 82% of the more than 3,700 CAPS members rating the solar shop believe it will outperform the broader market averages, the low two-star rating suggests they think there are better places for your money. Add First Solar to the Fool's free portfolio tracker to see if it can keep shining brightly.
According to the market watchers at IDC, Hewlett-Packard (NYSE: HPQ ) has convincingly won share in the high end of the blade server segment by capturing 52% of the revenue in the fourth quarter, almost double the 28% market share won by IBM.
Yet it's exactly those kinds of "losses" that attract CAPS member zo6racer to IBM, because its corporate culture allows it to identify shortcomings and make up for them:
I feel that IBM will outperform the market over the next -4 years. IBM is finally realizing its areas of weakness in areas that it has missd early opportunities in, I think it's going after the software and service sector more agressively, an area in which [Oracle] has executed well; it is finally realizing that cloud computing is bigger than they thought and it is only in its beginning stages. Addionally IBM has a strong balance sheet and could buy a target in the near future.
Add the software giant to your watchlist and let us know on the IBM CAPS page whether it still has a seat at the growth table.
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.