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5 Top Three-Digit Stocks

By Rich Duprey - Updated Apr 5, 2017 at 8:01PM

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These high-priced honeys might be worth every penny.

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, whereas 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 (max 5)

Return on Capital, TTM

Fairfax Financial (NYSE:FFH)

$276.90

****

24.8%

National Western Life Insurance (NASDAQ:NWLI)

$157.24

**

4.8%

Strayer Education (NASDAQ:STRA)

$204.18

**

36.9%

Washington Post (NYSE:WPO)

$399.80

**

5.3%

Wesco Financial (AMEX:WSC)

$280.00

****

3.1%

Source: Capital IQ, a division of Standard & Poor's, and CAPS. TTM = trailing 12 months.

High-falutin' honeys
While Fairfax Financial may have been a bit early in 2003 in calling the securitization frenzy a mechanism that would end badly, the insurer was ultimately proved right. It has profited where other insurers are failing, or in the case of American International Group (NYSE:AIG), have had to be taken over by the government because of their own complex investments. CAPS member xiaolifeidao appreciates the foresight Fairfax has used and believes it will continue to prosper as others succumb, as stated in this pre-Thanksgiving pitch:

The low P/E speaks out the company's success in the last 3 yrs. This company gets $7 billion cash, $2 billion debt, so it has tons of cash ready to deploy now, to buy all those solid energy, tech and drug company stocks. What a successful foresight strategy with perfect timing!

Newspapers represent a declining portion of overall revenue for the Washington Post, which, after the bankruptcy filing of the Tribune and the difficulties swirling around the likes of even The New York Times (NYSE:NYT), is probably a good thing. Yet, the paper is still a significant source of revenue, and CAPS All-Star member srk85 finds the market valuation the parent company carries to be excessive: "The newspaper industry is in secular decline. PE in the high 20s has nothing near the type of growth expectations necessary to sustain it."

Valuation is a concern for another CAPS All-Star looking at post-secondary education provider Strayer Education. buccayew isn't sure that the growth potential is as great as everyone seems to think it is:

Take a good look at the PE multiple. How long can hype last in this market? Growth potential is not like having real income now. I'd be surprised if this is selling for more than 50 three years from now. This, and several other so called education companies, will give many investors an education in unrealistic valuation.

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 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 us hear what you have to say about the great and almost-great companies that interest you.

Try any of our Foolish newsletters today, free for 30 days.

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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Stocks Mentioned

Graham Holdings Company Stock Quote
Graham Holdings Company
GHC
$589.74 (0.97%) $5.64
Strayer Education, Inc. Stock Quote
Strayer Education, Inc.
STRA
$69.63 (-0.29%) $0.20
American International Group, Inc. Stock Quote
American International Group, Inc.
AIG
$54.92 (2.56%) $1.37
The New York Times Company Stock Quote
The New York Times Company
NYT
$31.69 (3.56%) $1.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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