Are These High-Priced Stocks Worth Every Penny?
Jun 12th 2012 1:33PM
Updated Jun 12th 2012 4:16PM
Some investors think they'll land the biggest returns by fishing among penny stocks. While a move of just a few pennies might net you a whopper, it's more likely to have you falling hook, line, and sinker into the weeds of fraud and manipulation.
Instead try casting your line to the other end of the price spectrum, among stocks that trade north of $100 a share. These three-digit stocks (and sometimes they trade for four, five, and six digits) can oftentimes have you telling a whale of a tale of multibagger returns.
Regardless of how much a stock costs, it always comes down to whether the business is well-run. We'll check in with the smart set at Motley Fool CAPS to see which high-priced honeys they think are selling something fishy, and which ones they believe ought to be mounted over the mantel.
Apple (NAS: AAPL) unveiled its new product line yesterday, and it wasn't as disappointing as when the iPhone 4S came out instead of an iPhone 5. Back then there was an almost palpable letdown as it seemed we'd have to wait another year for the next-generation phone. But at yesterday's developers conference, a new operating system for the iPhone and iPad was unveiled along with a new line of MacBooks, though analysts are hoping the much-anticipated iTV is still in the cards.
Also as anticipated, Apple integrated Intel's (NAS: INTC) Ivy Bridge processor for improved performance and enhanced graphics into its new MacBook Air that now also sports Retina display. That technological advance was first unveiled in the latest iPad, offering four times the number of pixels as the iPad 2.
While hardware was certainly a center-stage act at the conference, the real star was Apple's enhancements to its software, which already captures the imagination of developers over rival systems like Google's Android. CAPS member trackjakeambrose is another that certainly expects extraordinary things out of Cupertino: "Greatest company in the world packed with brilliant minds. Future will see them provide a phone network, dominate the education industry, add tvs and possibly hologram projection."
More than 28,000 CAPS members have weighed in on Apple and 92% see it continuing to outperform the market. Indeed, all 60 Wall Street analysts tracking it on CAPS concur that it will outstrip the indexes' performance. Add Apple to your watchlist then let us know on the Apple CAPS page or in the comments section below if the conference's announcements will launch the consumer products giant to even newer heights.
Maize of fear
Corn inventories are expected to fall to a 16-year low this summer as dry, hot weather puts stress on the crop, causing prices to enjoy their biggest weekly advance in a year. And while it might not generate the same sort of rock-star enthusiasm as Apple's developers conference, the Agricultural Department's corn report tomorrow is highly anticipated among futures traders as it will give a sense of which way the market for grains will head.
Rising corn prices would signal good news for fertilizer companies like PotashCorp (NYS: POT) , CF Industries, and Terra Nitrogen (NYS: TNH) , which have seen corn prices pull back from last year's peak levels of $6 or $7 a bushel. Corn relies heavily on such fertilizers and farmers tend to plant more of the most profitable crops.
Hanging in the background is increasingly tepid support for ethanol, which also tends to drive corn and its prices. Federal subsidies for the biofuel expired at the end of 2011; some three-quarters of all ethanol makers lost money or at best broke even after reporting first-quarter results. Even those that are profitable are showing narrower margins. For example, net income at Archer Daniels Midland (NYS: ADM) dropped 31% in the quarter that ended March 31.
Because it supports more than just corn, Terra Nitrogen enjoyed a 5% increase in profits even though revenues were relatively flat in the first quarter. But with planting season well under way and a stock that has pulled back 30% from its highs -- it trades north of $200 a share, compared to nearly $300 back in April -- it looks like it might be poised to capture new growth. CAPS member Menisus says the "inexorable pull" of a growing global population needing to eat will drive Terra Nitrogen higher:
The fertilizr market is cyclical. weather related andevery excuse you can think about as to why it will not be long term postive. The question is when will current production per acre be outstripped by demand pullin fertlizer stocks throught the stratosphere?
Tell me in the comments section below if you think now would be a good time to add to or start a position, then add Terra Nitrogen to the Fool's personalized portfolio-tracking service to see whether it can achieve a bumper crop of profits.
Count to 10
Both of these companies are set on conquering new worlds, but check out The Motley Fool's free report "3 American Companies Set to Dominate the World" to get access to detailed analysis of some outsized opportunities you may not have considered.
At the time this article was published Fool contributor Rich Duprey owns shares of Intel and Apple, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of CF Industries Holdings, Intel, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Google, Apple, and Intel. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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