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 (NYSE: BRK-B  ) 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

Lorillard (NYSE: LO  )

****

$109.02

116.2%

Lubrizol (NMYSE: LZ)

***

$134.12

18.7%

Mastercard (NYSE: MA  )

***

$278.13

40.5%

Source: Capital IQ (a division of Standard & Poor's) and 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
After the Food and Drug Administration decided it wasn't going to ban menthol cigarettes after all, Lorillard's future isn't going up in smoke. However, that move may have helped the maker of the top-selling menthol-flavored cigarette Newport to become stronger: In anticipation of the FDA's decision, Lorillard introduced a non-menthol Newport and it's proving popular too.

Lorillard sold 9.5% more cigarettes as Newport sales jumped 8%, and the new cigarette made significant contributions to the increase in volumes. Lorillard also saw its discount brands, which include Maverick and Old Gold, soar, with volumes increasing 23% in the quarter.

But cigarettes aren't exactly a growing market, so Lorillard's gains came at the expense of Altria (NYSE: MO  ) and Reynolds American (NYSE: RAI  ) , both of which reported lower volumes of cigarette sales. While maybe it was the menthol smokers stocking up on the smokes in anticipation of a ban, the strength of the non-menthol flavored iteration should be a welcome addition going forward to help it produce large amounts of cash. Either way, investors can say, "Thanks, FDA!"

Highly rated CAPS All-Star AndrewGreenBull is cautious with Lorillard because domestic cigarette markets are a zero-sum game and anti-smoking lobbies aren't likely to retire anytime soon: "The room for cigarettes is getting smaller and smaller because of laws and public awareness of the harm for health."

Tell us on the Lorillard CAPS page whether Newport will be able to support the cigarette maker in the future.

One slick move
Lubrizol shareholders no doubt would have preferred a less messy acquisition, but the tainted decision of David Sokol to recommend that Berkshire Hathaway buy the oil additives maker doesn't detract from its position as a top company in the industry. It was actually a good bit of timing on Buffett's part.

Earlier Buffett had chosen to sell out Berkshire's holdings in peer Nalco just before it forecast a difficult 2011. Lubrizol, on the other hand, was buying some of Nalco's operations and was anticipating a much stronger future. Sokol's decision was a good call.

With the SEC looking into Berkshire's bid for Lubrizol, it will mean a longer process for the transaction to be completed. The CAPS community was already bullish on the additive maker's potential, with 92% of those rating it believing it would beat the market. You can add Lubrizol to the Fool's free portfolio tracker to see if anything develops that throws a monkey wrench in the acquisition gear works.

Triple-digit titans
It might be tempting to look at the earnings results of Mastercard and Visa (NYSE: V  ) as a statement about an improving economy, since both beat estimates as payment volume growth jumped. Mastercard saw a 13% increase, while Visa's volume surged 15%.

Yet a closer examination reveals it was the international business at each company that saw the greatest growth in the first quarter. Visa's cross-border volumes were up 16% year over year while Mastercard saw a 16.5% increase in worldwide purchase volumes; the U.S. was up just 7%. So although domestic revenues did rise, it might be better to see their results as saying something about the global economy.

Over 3,000 CAPS members have weighed in on Mastercard's future, and 91% believe it can beat the market indexes. k0stid0g004 thinks that in a matchup between the Big Three credit cards, Mastercard wins:

The government keeps an eye on the bank stocks but if the recovery continues people will spend more so fees go up up up. Visa and Am Ex will prosper too, but I like Master Card here

Add the charge card marketer to your watchlist and then give credit where it's due on the Mastercard CAPS page to give us your thoughts.

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.

American Express, Berkshire Hathaway, and Visa are Motley Fool Inside Value recommendations. Berkshire Hathaway is a Motley Fool Stock Advisor choice. Motley Fool Options has recommended writing puts on Lorillard. The Fool owns shares of Altria Group and Berkshire Hathaway. 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.


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