3 High Priced Stocks Still Worth Buying

Monday, February 8, 2021 | MarketBeat Staff
3 High Priced Stocks Still Worth Buying

Over time a stock's price can run up into the hundreds of dollars if things are going well. Many companies opt to enact a stock split that reduces the share price and makes it more accessible to retail investors. Other companies prefer to leave their share price high often to induce the perception of a premium investment.

This second scenario can deter some investors from buying a stock that has a high price tag. But these stocks shouldn't be dismissed. Sometimes buying even a few shares of a high-priced stock can lead to better returns than buying a lot of shares of low-priced stocks just because it feels good to have more shares.

Let's take a look at a few examples of stocks that come with hefty share prices but are still well worth the investment.

What Makes Parker-Hannifin a Good Stock?

Parker-Hannifin (NYSE:PH) is an S&P 500 industrial company that sells motion and control systems to a range of aerospace and commercial customers. The products are used to control the flow of gas and liquids in various hydraulic equipment and vehicles.

Parker-Hannifin is trading around $270 per share and hasn't issued a stock split since a 3-for-2 split in October 2007. What makes it a buy at this level?

For starters, Parker-Hannifin has one of the strongest balance sheets in the industrial sector. This has allowed it to weather the recent economic storm and will enable it to capitalize on growth opportunities as the global economy improves. Operating from a position of financial strength has also supported the company's decorated dividend hike history.

Investing in Parker-Hannifin is akin to investing in a rebound in the industrial economy. Like Caterpillar, the stock is commonly viewed as a bellwether of global industrial activity because its end markets include virtually every corner of the industrial sector from aerospace and automobiles to construction and refrigeration. As a provider of technologies that are always in demand, Parker-Hannifin is an indirect way to play a recovery in transportation, construction, energy, and agriculture all in one stock.

Why is Allegany Stock Worth the Price?

Alleghany Corporation (NYSE:Y) has a share price that is well above $500, but is worth every penny. The New-York-based property and casualty (P&C) insurance company generates most of its revenue from reinsurance policy premiums through its key TransRe subsidiary.

Catastophe losses related to not only COVID-19, but a damaging hurricane season have led to some dismal bottom-line results of late. But after a rough 2020 when earnings are expected to have plunged by more than 40%, the outlook is significantly brighter in 2021.

Sales are forecast to return to pre-COVID levels and analysts see earnings per share (EPS) reaching their highest level in years. Pandemic related underwriting losses are likely to subside allowing strength in insurance policy volumes to shine through.

While a persistently low interest rate environment are likely to keep investment income down for at least the next couple of years, Alleghany is witnessing momentum from other revenue sources. For the first nine months of last year, net premiums were up 9% to $4.4 billion. This was driven by strength at not only TransRe, but Alleghany's regular insurance units like PacificComp, RSUI Group, and CapSpecialty all of which have proven to be valuable acquisitions.

Alleghany stock is trading at less than 1x sales and 12x forward earnings. Prior to the onset of the pandemic, the stock reached a record high near $850 before plunging below $500. With the backdrop for the insurance industry improving, this is a great time to get in on a proven long-term winner. It won't be long before this leading reinsurer revisits its pre-pandemic price levels.

Is it a Good Time to Buy Costco Wholesale Stock?

If it weren't for a pair of two-for-one stock splits Costco (NASDAQ:COST) would be close to a $1,500 stock. After a sharp ascent in 2020, the $350 per share discount warehouse operator remains a bargain for investors.

With more than 800 warehouse clubs in the U.S., Canada, and other international markets, Costco remains a dominant player in retail. Aside from the benefits of membership pricing and bulk purchases, it is the enormous variety that makes it a winner year after year. Customers continue to flock to Costco to stock up on foods and beverages but also consider it a destination for all things retail including electronics, appliances, and garden products. Toss in auxiliary offerings like pharmacies and gasoline, and Costco is often the only place shoppers need to go.

Its also easy to see why Costco's sales and earnings consistently rise year after year. Despite the size of its expansive locations, Costco generates sales per square foot that are well above the industry average. And despite record amounts of consumer spending going to online storefronts these days, Costco, hasn't skipped a beat.

In fact, it has a growing e-commerce platform that has been a major contributor to performance. Same day grocery and prescription delivery services have been well received by consumers during the pandemic—not to mention same day alcohol delivery service—with the help of Instacart.

As Costco continues to build out its physical retail footprint globally and builds off the success of its e-commerce business, it should remain a dominant player in retail for many years to come. It is also one of the most shareholder friendly of companies on account of its regular and special dividend distributions. So, regardless of the number on the stock's price tag, Costco should be in every long-term investment portfolio.

 

 

 

 

 

Costco Wholesale is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.



7 Semiconductor Stocks Set to Gain From the Chip Shortage

Who knew that something so tiny could create such a big problem? However, that’s the case with the semiconductor industry. Chip manufacturers are facing supply chain disruptions due to the Covid-19 pandemic.

Semiconductors are in high demand for the big tech companies who need the chips to power the servers for their data centers. But they are also needed for much of the technology we take for granted including laptops, tablets, mobile phones, gaming consoles, and automobiles – a sector that seems to be at the root of the current crisis.

Any weekend mechanic knows that even traditional internal combustion cars are heavily reliant on electronics. In fact, electronic parts and components account for 40% of a new, internal combustion vehicle. That’s more than doubled since 2000.

However as it turns out, some manufacturers may have overestimated how soon consumers would be ready for an “all-electric” future. And that meant that they didn’t forecast how much demand there would be for the kind of chips needed to do the mundane, but vital tasks of steering, braking, and even powering windows up and down.

Part of the problem is that U.S. businesses are heavily reliant on countries like China and Taiwan for their semiconductors. In fact, only about 12.5% of semiconductor manufacturing is done in the United States.

Of course, this creates a tremendous opportunity for the companies that manufacture these chips. And it comes at a good time. The semiconductor sector is notoriously cyclical and was coming down from the elevated demand for the 5G buildout.

In this special presentation, we’ll give you a list of seven semiconductor companies that you can invest in to take advantage of this opportunity.

View the "7 Semiconductor Stocks Set to Gain From the Chip Shortage".


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Costco Wholesale (COST)2.3$371.28-0.8%0.75%38.12Buy$387.43
Alleghany (Y)1.7$680.14-1.0%N/A-143.79Buy$800.00
Parker-Hannifin (PH)2.1$313.77-1.2%1.12%34.33Buy$317.85
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