5 Top Three-Digit Stocks

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.

Meanwhile, some companies' 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's hefty price tag shouldn't scare you away, either. Handsome is as handsome does, so let's check in with the Motley Fool CAPS community to see which triple-digit titans inspire the most confidence from our investor-intelligence database.

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 at least a hint about whether these stocks can maintain their lofty valuations.

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

Highfalutin' honeys
Search engines and Internet portals have always held a level of attraction and fascination for investors, who have bid these companies' shares up to astronomical levels. Yahoo! (NASDAQ:YHOO) basked in the warmth of investor love back in the tech-bubble era; more recently, Google has enjoyed premium pricing, too. Yet that same adoration turns off some other investors. CAPS member tonyjtonyj finds Chinese search maven Baidu.com extremely overvalued:

"just another search engine with Ultrahigh P/E and ridiculously high stock price. . . reminds me of yahoo circa 2000 . people never learn. .This one's going down along with google... see you at 100"

If any companies ought to serve as leading indicators of retail sales, credit card companies like MasterCard and Visa (NYSE:V), which handle the bulk of most retail transactions, surely fit the bill. And from the looks of it, the reports from MasterCard's professional-services arm underscore what we may have already suspected: Retail's outlook is bleak. Sales have continued to slow in the first half of November, including a 22% decline in electronics and appliance sales.

CAPS member mailstrom views MasterCard with disfavor, noting that consumer debt probably won't enjoy any sort of a government bailout:

"one trillion in credit card debt, notices of default, rates to 28.99% .. no bailout for this mess"

When part of the reason for your lofty valuation comes undone, a three-digit stock can quickly drop to two digits or less, as Rio Tinto investors have discovered. The mining company's stock fell below the $100 per share mark yesterday for the first time in about four years, as BHP Billiton pulled out of its unsolicited merger bid. CAPS All-Star britpick was looking ahead to this possibility in this pitch from last month, and thinks the company is still decent:

"Will get a short term bump in price if the BHP bid goes ahead. If not Rio Tinto still has a healthy pipeline of prospects and projects that will deliver longer term value to this global miner as China and India come back from the global recession that is likely to last through 2009"

Whether Rio Tinto can reach three-digit territory again, only time will tell.

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.

Sign up today for the completely free service, and let us hear what you have to say about the great and almost-great companies that interest you.