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A Bargain Isn’t a Bargain Unless It Goes Up in Value
Attention bargain shoppers: Just because something is cheap doesn’t mean it’s a bargain.
And nowhere is that more true than in the stock market. Sure, there have been lots of low-priced deals on stocks lately, as plenty of good companies watched their shares take a beating in the recession. But that doesn’t mean all cheap stocks are worth buying. The way I see it, a bargain isn’t a bargain unless that bargain goes up in value.
Here are 10 outstanding high-priced stocks that trade at real bargain basement prices — that is, they are bargains when you consider the great value you get for your investment dollars.
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Stock #1 – AutoZone (AZO)
AutoZone (AZO) is a specialty retailer and distributor of automotive replacement parts and accessories. Its stores offer the do-it-yourself car guy tremendous value on parts and accessories. The company stocks all kinds of parts and has a great sales staff. In my experience, their parts personnel have always been very knowledgeable and extremely helpful.
On Sept. 23, the company reported a 3% decline in its fiscal fourth-quarter profit. This decline in earnings could have been the result of the government’s “cash for clunkers” plan, which saw many older vehicle owners turn in their cars for a credit toward the purchase of a new vehicle. But apparently, analysts who cover AZO weren’t too perturbed by the company’s numbers. FBR Capital Markets upgraded AutoZone to “market perform” from “underperform” after the earnings news.
Despite its high price tag, AZO could still drive your portfolio higher.
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Stock #2 – First Solar (FSLR)
Arizona-based First Solar (FSLR) is hot. The company reported a blowout quarter in July, with net income more than doubling in the second quarter and easily beating consensus Street estimates. In Q2, net income was $180.6 million, or $2.11 per share, compared with $69.7 million, or 85 cents per share, a year ago. The word on the Street was for earnings of just $1.65 per share. Impressively, the company also beat top line estimates, coming in with Q2 revenue of $525.9 million. Analysts had expected the company to come in with revenue of just $458.1 million.
First Solar shares have had the virtual equivalent of a solar flare since their debut in 2006. This solar stock is well off its all-time high of just under $300, and the shares still are capable of giving investors scorching.
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Stock #3 – Priceline.com (PCLN)
Leading online travel site Priceline.com (PCLN) is perhaps best known for its pitchman, pop culture icon William Shatner. But to in-the-know investors, this stock is best known for booking big profits. Now you might think that with the country in a recession, stocks in the online travel space wouldn’t be doing very well. But actually, the opposite is true.
According to a recent article in Investor’s Business Daily, many corporate travel managers have been forced to cut the cost of basic travel expenses due to the recession. “Firms are telling execs to move their seats from the front to the back of the plane — and to find budget-class hotel rooms.” Bingo! You see, during tough economic times, both corporations and consumers look to save every dime, and one way to do this is to book flights and hotels using online travel sites like Priceline.com.
I expect the company to keep on booking solid earnings, and I expect the shares to keep flying higher.
See also: What Is Fueling the Boom in Online Travel Stocks?
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Stock #4 – Goldman Sachs (GS)
What can you say about this crown jewel of brokerage and investment banks that hasn’t already been said? Goldman Sachs (GS) is, by far, the most prestigious, as well as the most politically-connected, bank on Wall Street. Its success over both the fat years and the lean years has been difficult to ignore.
So it’s no wonder then that shares of this iconic financial giant are up nearly 100% over the past five years, while stocks that comprise the Dow Jones Financial Services index were down 11% over those same five years.
If you want to own the best-of-breed in the financial sector, then Goldman Sachs is the high-priced bargain stock for you.
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Stock #5 – Apple (AAPL)
If you’re a member of the Apple (AAPL) cult like I am, you already know the near-religious commitment we have to the anything Steve Jobs and company bring to market. Sure, the company makes the most expensive computers out there, as well as the costly iPhone smart phone, but to us addicts, money is really no object.
Apparently, we hardcore Apple fanatics aren’t the only ones who feel this way. The company’s stellar recent earnings beat was just the latest in a string of consistently better-than-expected quarterly performances. And when it comes to what Wall Street thinks, well, I suspect over 100% return year-to-date, as well as a near 900% gain over the past five years in AAPL shares tells you what you need to know about the stock’s appeal.
The Apple juggernaut is perhaps the best-of-breed personal technology company operating today, and their high-priced shares confirm this. The way I see it, Apple is a bargain at almost any price.
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Stock #6 – BlackRock (BLK)
Much like Goldman Sachs, BlackRock (BLK) is a financial company that’s delivered big gains for its shareholders over the past five years. In fact, the BLK shares are up 188% over the past five-years. More recently, the company’s shares are up over 50% in the last six months.
BlackRock is an asset management firm that provides portfolio management services to corporate and public pension plans. It also manages pension funds for insurance companies, mutual funds, endowments and private foundations. You might say that BlackRock is the money manager of choice if you’ve got a really big pension fund in need of the best money managers around.
If you want to take advantage of the competence of BlackRock’s money managers, you don’t have to be part of a pension fund. All you have to do is buy their high-priced, bargain stock.
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Stock #7 – MasterCard (MA)
I’d venture a guess that you have at least one, if not multiple, MasterCard (MA) credit cards in your wallet right now. In addition to its credit card division, the company provides transaction processing services to its customers that support of their credit, deposit access, electronic cash and automated teller machine payment card programs. The goal of the company is an ambitious one: To put the use of cash out of business.
The stock has certainly been on a tear since its 2006 debut, rising to over $300 per share near the midway point of 2008. Yes, the recession and accompanying consumer spending pullback took its toll on MasterCard in late-2008 and early 2009, but despite the tough economic environment, MA shares are up over 50% year to date.
Sure, MA is trading at a high price, but in my opinion the stock still should be considered a great bargain.
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Stock #8 – CME Group (CME)
As an observer of financial markets, I’ve been stunned by the recent growth of options trading. Options and futures trading have become huge among individual investors, and the interest in the topic is only getting bigger. So, who benefits most from the surge in options and futures trading? CME Group (CME).
CME Group is the company that operates the Chicago Mercantile Exchange and the Chicago Board of Trade, the place where options and futures trades actually take place. Whenever you place an options or futures transaction, the only sure winner in the game is CME Group.
As more and more individual investors embrace options and futures trading, CME Group’s bottom line is likely to keep on trucking. CME shares now trade above $300, but they’ve been as high as $710, making this a high-price stock a bargain.
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Stock #9 – Google (GOOG)
Everyone who uses the Internet knows what a powerful tool Google’s (GOOG) search engine is. In fact, the ubiquity of Google searches has now put the company’s name firmly in our verbal lexicon. Hey, you know that you’ve made it big as a company when your name becomes a verb, as in, “I Googled myself.” Fortunately for shareholders, Google is more than just a catchy verb.
Shares of the search engine firm have delivered an incredible 313% gain over the past five years, and year-to-date the shares are up a very solid 62%. I think that despite the near $500 share price, GOOG shares still are a bargain, and that means they are likely to search out some very nice gains for high-priced stock enthusiasts.
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Stock #10 – Berkshire Hathaway A Shares (BRK.A)
Alright, we’ve come to our final high-priced bargain stock, and no high-priced stock list would be complete without the best known high-priced stock out there, Warren Buffett’s Berkshire Hathaway A Shares (BRK.A).
At over $100,000 per share, this is, by far, the highest-priced, most well-known stock on our list. With an investment in Berkshire Hathaway, you are putting your money on the success of one of the greatest investment minds the word has ever known.
Sure, a hundred grand is a lot for one share of stock, but if you want to get your money alongside one of the best track records in modern investment history, that’s what you have to pay.
Oh, and if you want to invest a wee bit smaller, you can always choose Berkshire Hathaway B Shares (BRK.B), as they only trade for a mere $3,306 per share.
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