Don’t be fooled by the sticker shock of stocks priced above $1,000 – sometimes, they pack a punch worth every penny.
Legendary investor Warren Buffett famously underscored the distinction between price and value, reminding investors that it’s not just about the cost of a stock but what you gain in return. This crucial lesson is often learned the hard way by penny stock investors who discover the perils of investing in low-priced, volatile companies. In contrast, those who took a leap of faith in Warren Buffett’s Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) ten years ago, purchasing a single share for a hefty $187,000, would now be sitting on an investment worth nearly $632,000. Who truly got the better end of the deal?
Quoting writer Oscar Wilde uncovers a similar truth: “A cynic knows the price of everything and the value of nothing.” When faced with a high-priced investment opportunity, it’s essential not to hastily dismiss it as overpriced. Sometimes, the value hidden within justifies the steep cost.
Below are three stocks, each priced above $1,000, that deliver substantial bang for your buck.
Broadcom (AVGO)
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Semiconductor powerhouse Broadcom (NASDAQ:AVGO) is on an evolutionary path, transitioning from a mobile chip manufacturer to an infrastructure solutions giant. The finalization of its acquisition of VMWare last year is set to drive this transformation. With an anticipated 50% revenue stream from infrastructure software this year, Broadcom’s strategic moves are poised to pay off.
Since Avago acquired Broadcom for $37 billion in 2016, Broadcom has been on an acquisition spree, nabbing companies like CA Technologies, Symantec, and Brocade. The recent addition of VMWare marks a pivotal step in its strategic pivot towards a more stable software market.
Although Apple remains a key revenue stream for Broadcom, comprising 20% of its earnings in recent years, the chip titan is diversifying its portfolio. At around $1,300 per share, an investment in AVGO offers a glimpse into a future with clearer revenue streams and a more predictable trajectory.
Chipotle Mexican Grill (CMG)
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Chipotle Mexican Grill (NYSE:CMG) may have a steep price tag of over $2,800 per share, but an upcoming 50-to-1 stock split will bring this popular restaurant chain’s shares down to the $50-$60 range. Unchanged in essence, Chipotle remains a top contender in the growth stock arena.
The catalyst for CMG’s impressive 63% surge last year and 225% growth over five years lies in its innovative addition of drive-thru lanes at its eateries. Amid the pandemic, these drive-thrus proved invaluable, driving up mobile digital orders, enhancing restaurant efficiency, and boosting profits.
Chipotle is aggressively expanding its footprint, opening 121 new locations in the last quarter, with a focus on adding drive-thru capabilities. With Wall Street predicting a 33% annualized earnings growth over the next five years, CMG’s forward-looking price-to-earnings ratio of 44 seems justified and poised for accelerated growth.
W.W. Grainger (GWW)
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Industrial stalwart W.W. Grainger (NYSE:GWW) has joined the exclusive $1,000+ club, offering steadfast growth that outshines the S&P 500. Over the past decade, GWW shareholders have enjoyed an impressive total return nearing 300%, significantly outperforming the broad market index’s 180% gain.
The allure of W.W. Grainger lies in its enviable track record of dividend payouts, boasting increases for over half a century and earning its status as a Dividend King. With a steady 7% compound annual growth rate in dividends over the last decade and over 8% annual growth in free cash flow, the company’s financial health is robust.
Operational in two key segments – high-touch solutions (HTS) and endless assortment – Grainger caters to the diverse needs of its maintenance, repair, and operations (MRO) customers. The bulk of its $16.5 billion in yearly revenue originates from the HTS segment, positioning GWW for continued growth and justifying its premium share price.
On the publication date, the writer did not hold any positions in the stocks mentioned. The opinions expressed are solely those of the author, following InvestorPlace.com guidelines.
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