Perhaps one of the biggest misconceptions in investing is that low-priced stocks are the best ones to buy because they’re cheap. After all, if a stock is trading for less than $20 or even $5 per share, it must be a bargain. While that can be true, it isn’t always the case. A $10-per-share stock could actually be very expensive when looking at valuations. In fact, a high per-share-priced equity could be very cheap.
A stock costing $200, $500 or even $2,000 per share could be the best stocks to buy. It all comes down to how much investors are currently paying for sales, profits, and the ultimate book value of the firm.
As Warren Buffett always says, “Price is what you pay; Value is what you get.”
With that in mind, here are five high-priced stocks worthy of inclusion in your portfolio.
High-Price Stocks to Buy Worthy of Your Portfolio: ServiceNow (NOW)
Price per share: $280
If you have ever worked in an office, one of the most common running jokes is that the IT Help Desk isn’t very helpful at all. Thanks to cloud computing giant ServiceNow (NASDAQ:NOW), that joke is a thing of the past. NOW offers a variety of Software as a Service (SaaS) applications designed to automate various IT functions. This helps improve workflows, reduce costs, and ultimately keep modern companies in tip-top shape. This justifies NOW’s $280 per share price and makes it one of the best stocks to buy today.
With NOW stock, you have fast growth and profits. During the first quarter of 2019, ServiceNow reported a 34% jump in revenues to more than $788 million, with the bulk of those revenues coming from reoccurring subscriptions. Those subscription-based sales jumped more than 36% for the quarter. And while many cloud computing and SaaS firms have rising revenues, NOW stock is turning those sales into profits. Earnings per share rose from 56 cents in the first quarter of 2018 to 67 cents for Q1 in 2019.
But what really makes ServiceNow’s high-per-share-price worth it is the future. NOW’s platform is so good that the firm has expanded it to cover a variety of other business functions including human resources, customer service, and even application development. The idea is to add efficiency and automation to a variety of business processes.
With the future rosy and current market minting money, NOW is one of the best high-priced stocks to buy today.
White Mountains Insurance Group Ltd (WTM)
Price per share: $1,043
Insurance companies can be amazingly profitable cash-generating machines. That’s because they can make some serious bank on their float.
An insurance company’s float consists of all the premiums it has collected but hasn’t paid out yet as claims. This float can be invested in a wide range of things likes bonds and other fixed-income items. However, some of it can be used to bet on stocks. Moreover, there are no restrictions on investment with regards to the interest and earnings the float has generated.
White Mountains Insurance Group (NYSE:WTM) has used this to its advantage.
WTM owns and operates a variety of property and casualty, reinsurance, and life insurance business lines that throw off a lot of cash. For example, White Mountain’s HG Global/BAM subsidiary, which provides insurance on municipal bonds, managed to deliver record high total premiums last year. With that, the insurer has used its rising float to its advantage. WTM has taken stakes in several high-margined asset management businesses, other reinsurers and even a vast portfolio of index funds.
If this sounds familiar, you’re absolutely right. This is the same strategy Warren Buffett used to grow Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) over the years. Like Berkshire, WTM has never split its shares either.
With its book value continuing to rise and WTM stock opportunistically buying back shares by the boatload, its current $1,043 per share makes it a cheap high-price stock to buy today.
Mettler-Toledo International (MTD)
Price per share: $838
The only time most people come in contact with products made by Mettler-Toledo International (NYSE:MTD) is in the produce section of their local grocery store. MTD got its start making the scales used to weigh fruits and vegetables back in the 1900’s. These days, MTD is much more than just a produce scale producer: It’s a global powerhouse in precision analytic tools and devices. Mettler-Toledo makes products for life sciences and biotech drug development, high-tech engineering and industrial processes, as well as devices for quality control.
And yes, even retail scales used for produce.
As the leader in precision weighing instruments, Mettler-Toledo has seen its star rise over the last few years. For all of 2018, MTD managed to see local currency sales rise by 6% while profits jumped by 16%. Sales continue to grow resulting in plenty of profits during the first quarter of this year. Did I mention its cash flow growth is also growing by double-digits?
Given the consistently beneficial results at Mettler-Toledo and its leadership position in the life sciences industry, the firm has seen its share price soar. Over the last five years, MTD stock has managed to increase by more than 230%. With growth not slowing and its end markets going strong, MTD could have more gains in store.
Price per share: $1,893
A single share of Amazon (NASDAQ:AMZN) costs just over $1,890 and could be worth every penny. We all know AMZN as the online retailer that continues to dominate, disrupt, and change the consumer game on a variety of fronts. From introducing one-day shipping to its vast catalog of private brands, Amazon is the best name when it comes to e-commerce.
The real reason why AMZN stock is one of the best to buy has nothing to do with retail but with the other higher-margin businesses it owns and operates.
Amazon continues to dominate the cloud sector with its Amazon Web Services (AWS) suite. Their IaaS, SaaS and other applications come with massive margins and cash flows. These are the driving forces that keep the retail operations going.
Meanwhile, new forays into advertising and other web-related higher-margin businesses are starting to generate serious cash for AMZN.
All of these factors have finally made Amazon profitable. With the continued cash generation and profits flowing into Amazon’s coffers, its high price is actually pretty cheap and makes the stock one of the best to buy today.
Intuitive Surgical (ISRG)
Price per share: $525
What’s crazy about Intuitive Surgical’s (NASDAQ:ISRG) big $525 per share price tag is this is actually after a stock split a few years ago. But the high price stock is still worth buying.
ISRG was one of the first firms to dive into robotic-assisted surgery. That head start position is paying great benefits to Intuitive Surgical shareholders.
Today more than 5,100 da Vinci Surgical System robots are located in hospitals across the world. The number of applications and uses for its surgical robots continues to grow as well.
The beauty is that ISRG operates on a business model similar to a razor and blades model. The robots are expensive to start with, but the firm racks up extra sales as instruments, training, and software upgrades have doctors coming back for more. The first quarter saw a decent 20% increase in revenues from additional instruments and accessories. As more systems are installed and medical professionals use da Vinci for more applications, ISRG should see these revenues soar.
Meanwhile, the firm’s hefty $5.1 billion in cash and shrinking share count make for a nice buffer of safety for the stock.
As the top dog in robotic surgery, ISRG stock is one of the best to buy regardless of its high price.
At the time of writing, Aaron Levitt held a position in AMZN.