Low-priced stocks really catch investors’ eyes. But the reality is that it doesn’t matter what a stock’s price is — it only matters how much it goes up or down.
Consider that a $1,000 investment is the same whether you buy one share of a $1,000 stock or 1,000 shares of a $1 stock. If these investments go up 1%, you make the same net profit of $10 on your total investment.
Consider that a week ago on April 12, Amazon (NASDAQ:AMZN) traded in a range of $185.61 to $192.26 — a “big” window of $6.65 in difference. But at the end of the day, the stock closed up just 1.4%. Not a lot of fireworks there.
What I’m trying to get across is that you shouldn’t fool yourself into thinking a high-priced stock is out of reach. Yes, trading in odd lots of two or three shares might seem silly — but if you use a limit order to protect your entry price, there’s no reason why you can’t grab some of these shares.
Of course, you have to make sure you’re buying a stock that’s sound no matter what the price. And of the highest-priced stocks out there, these five $100-plus investments are worth a look — even if you only buy a handful of shares:
Priceline (NASDAQ:PCLN) and its iconic pitchman William Shatner have parted ways, but don’t let that tarnish your opinion of this online travel website. Its “name your own price” model for airfares and hotels is a hit with cash-strapped consumers, and its growth overseas is stunning. Believe it or not, PCLN now offers reservations in about 100 countries and more than 40 languages.
That has allowed for big growth despite the fact that Priceline is competing with Internet travel sites like Expedia.com (NASDAQ:EXPE) and Kayak, among others. Profits almost doubled from fiscal 2010 to 2011, and an additional 25% in growth is forecast for 2012.
Priceline reports earnings May 9, so you might want to get in before the surge. Share prices leaped 7% in one trading day after its last report in February. For those keeping score, that was a move of over $40 in a single day. If that doesn’t prove to you that these stocks can jump around dramatically despite a sky-high price tag, nothing will.
Of course, at more than $700 per share, most retail investors are only going to be able to afford one or two. But considering a 53% return year-to-date, buying a small lot would have been quite a wise investment.
Intuitive Surgical (NASDAQ:ISRG) is a high-tech health care stock with a sky-high share price of about $600 right now. But don’t be scared off by the hefty price tag.
Intuitive Surgical just reported first-quarter net income of $3.50 per share after the close Tuesday, up from $2.59 per share in the year-ago period for a 35% increase. The consensus estimate was for EPS of $3.14, so ISRG blew away forecasts. As a result, shares gapped up as much as 9% on Wednesday and broke out to a new 52-week high.
The reason for this big success is that ISRG makes the innovative da Vinci surgical systems that have revolutionized operations used to treat cancer and heart disease, among other things. The robotic surgery system allows doctors to operate on a patient with fewer incisions, speeding up recovery time and reducing the risk of complications.
ISRG is up almost 400% in five years and almost 30% year-to-date in 2012. Don’t think this is necessarily a top, though. The company has seen 10 straight quarters of year-over-year profit increases and has seen a streak of revenue increases even longer than that. Health care is one of the few growth areas in the American economy, and ISRG is well positioned to capitalize on this trend.
A less sexy stock than ISRG is W.W. Grainger (NYSE:GWW), a distributor that is a big player in the rather boring business of “facilities maintenance.” However, since it distributes pumps, tools, motors and other gear that is crucial to a wide variety of businesses, GWW is very much tied to broader economic growth.
Sure, we certainly are not in the midst of an economic boom or a screaming recovery. But as industrial and consumer indicators inch higher, GWW has been seeing definite improvements. Grainger reported just this Tuesday that first-quarter profit jumped 19%, boosted by a double-digit sales increase. That topped Wall Street forecasts and prompted GWW to lift its full-year profit and sales guidance.
The company has seen nine consecutive quarters of year-over-year revenue increases. EPS numbers jumped 29% from 2010 to 2011 and are set to surge as much as 20% in fiscal 2012. W.W. Grainger is expanding in China and Panama, too, which could add even more momentum to shares.
The stock has nearly doubled in the past year and is rapidly closing on its 52-week high of $221.84.
Apple (NASDAQ:AAPL) is the obvious high-priced tech player. But Apple is a “bargain” right now after a recent slide, off about 5% from its 52-week high of $644. Although you might only be able to buy a few shares of this tech giant, it could be well worth it.
I have covered the reasons in detail in previous articles, but highlights include:
- Cash Hoard: Apple is sitting on a huge stockpile of $30 billion in cash and short-term investments and another $67 billion in long-term investments.
- A New Dividend: Starting in July, shareholders will get a $2.65 quarterly dividend for a decent 1.7% yield.
- No Sales Slowdown: Revenue has tripled from 2008 to 2011, from $32.4 billion to $108.2 billion. Everyone keeps wondering when Apple will hit a wall, but don’t expect that to happen when Apple earnings are reported April 24.
- Gadget Dominance: The recent revamp of the iPad, the launch of an Apple flat-screen TV and a highly anticipated iPhone 5 launch this summer will keep Apple on top of the consumer electronics market. You can expect revenue to keep moving up for some time.
- Bargain Valuation: All this hasn’t caused Apple to outrun its earnings, with a reasonable forward P/E of about 11 right now based on fiscal 2013 forecasts!
MasterCard (NYSE:MA) is at the center of a macro trend that is tough to ignore: the death of paper money. Per-swipe transactions continue to rise even in America, since as much as 40% of transactions in the U.S. still take place with cash or paper checks.
But the real growth for MasterCard is coming from emerging markets, where a rising middle class is getting access to bank accounts and debit cards. Remember, MasterCard is not a debt issuer, but more of a toll-taker on the e-commerce superhighway. Every time you make a purchase, MasterCard gets paid — and it’s hard to believe that the number of people using plastic is going to decline anytime soon.
MA has reported 11 straight quarters of year-over-year revenue increases and is set to see earnings per share skyrocket from $14.85 in fiscal 2011 to $21.75 in fiscal 2012 — a nearly 50% increase.
MasterCard reports earnings May 2 and could easily break through its 52-week high of $443.80 with a good report.
Jeff Reeves is the editor of InvestorPlace.com. Write him at [email protected]??.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.