A recent article by Pomona College finance professor Gary Smith has me thinking about stocks to buy over $200.
Admittedly, AAPL is not quite there yet, trading around $187 as a write this, but close enough.
A well-written and mathematically sound valuation of Apple stock, Smith concluded that if you buy at $200 and hold for ten years time, you’ll be happy you did.
I’m not suggesting for a minute that buying stocks trading over $200 are the key to your financial future, but they are often this high because of strong economic underpinnings.
Take Amazon (NASDAQ:AMZN), for example.
It crossed $200 in March 2012. If you’d bought 100 shares back then, today you’d have an annualized total return of 41% in the six-and-a-quarter years since and, more importantly, a profit of $151,257.
Out of all of the S&P 500 stocks, 52 trade at $200 or more. Here are my seven stocks — one from seven different sectors — to buy over $200.
Stocks to Buy Over $200: Sherwin-Williams (SHW)
Sherwin-Williams (NYSE:SHW) is my pick from the basic materials sector. Down 0.40% year-to-date, it has some work to do if it wants to finish 2018 up double digits, something it has done five times in the past decade.
The global paint business was recently in the news, but not in a good way. Three people, including an analyst with S&P Global were charged with insider trading related to its 2016 purchase of Valspar. It seems the analyst allegedly tipped off two friends of the impending announcement netting them $300,000 on Valspar stock.
While that’s not Sherwin-Williams’ fault, it’s never good to have your company associated with this kind of profiteering.
The company’s Q1 2018 results paint a picture of a very strong global paint and coatings business that saw revenues grow 6.9% during the quarter to $4.0 billion generating $2.89-per-share in profits with expectations in fiscal 2018 of a minimum $16.05-per-share in earnings.
In the case of Sherwin-Williams combining with Valspar, one plus one equals three.
Stocks to Buy Over $200: SVB Financial (SIVB)
SVB Financial Group (NASDAQ:SIVB) is my pick from the financial sector. Up 25% YTD, it’s on a seven-year winning streak that doesn’t look to be broken anytime soon.
If you can only own one bank, I wholeheartedly suggest you hold SVB Financial, the holding company for Silicon Valley Bank, consistently named one of the 100 best banks in America.
Silicon Valley Bank got its start lending money to tech startups and has since broadened its base to include innovators and entrepreneurs outside the technology sector with a loan portfolio nearing $25 billion.
“The combination of these two things [digital health and machine learning], I think is super exciting,” SVB Financial CEO Greg Becker told Fortune recently. “I think we’re going to see an incredible amount of innovation over the next five, ten, 15 years.”
Innovation is a big reason I called SIVB in 2013 one of the five best stocks to own for the next 20 years. Up 192% since then, I believe it’s just getting started.
Stocks to Buy Over $200: Intuitive Surgical (ISRG)
Source: Jon Fingas via Flickr (Modified)
Intuitive Surgical (NASDAQ:ISRG) is my pick from the healthcare sector. Up 34% YTD through July 2 compared to 12% for its medical instrument peers, it has managed to deliver an annualized total return of 44% over the past three years, 2.5 times the return of its peers.
I first recommended ISRG in March 2013. I reaffirmed my recommendation four months later despite it falling by 13% on concerns the company’s da Vinci robotic surgical systems — which cost in the millions to purchase — would no longer be a spending priority for hospitals looking to cut costs under Obamacare.
I wasn’t buying the word on the street feeling surgeons would continue to clamor for their use and hospitals would comply. Since 2013, revenues have grown by 38% to $3.1 billion, while non-GAAP net income has increased by 56% over the same period to $1.05 billion from $671 million.
In May, Intuitive Surgical announced that the FDA approved its da Vinci SP robotic system for use in single-incision urological procedures.
Shipments of the new product will begin in Q3 2018, providing another growth vehicle for ISRG, the leaders in medical technology for minimally invasive procedures.
I don’t see Intuitive Surgical slowing down anytime soon.
Stocks to Buy Over $200: Boeing (BA)
Source: Phillip Capper via Flickr
Boeing (NYSE:BA) is my pick from the Industrial Goods sector. Up 15% YTD compared to 4% for its aerospace and defense peers, it has managed to deliver an annualized total return of 17% over the past 15 years, 210 basis points greater than its peers.
On July 2, the Brazilian news media reported that Boeing and Embraer (NYSE:ERJ) would submit the contracts bringing Embraer’s commercial aviation division together with Boeing’s commercial aviation business to the Brazilian government for its blessing.
The year is going well for Boeing despite the China tariff headwinds threatening its most significant growth market — Boeing will sell $1 trillion of its planes to China over the next 20 years — and bringing Embraer under its fold puts a cherry on top of the sundae.
There might be some turbulence for Boeing stock over the next 12 months; I would take any retreat of its stock price as an opportunity to buy at a better price.
Boeing’s currently operating at maximum efficiency and should be able to keep it up despite the storm clouds in China.
Stocks to Buy Over $200: Amazon (AMZN)
Amazon is my pick from the services sector. Up 47% YTD compared to 25% for its specialty retail peers, it has managed to deliver an annualized total return of 29% over the past 15 years, making CEO and founder Jeff Bezos one of the better providers of shareholder value.
You’re probably not going to believe this, but picking Amazon as my service-sector pick wasn’t a slam dunk despite the fact I’m a big fan and think Amazon’s long-term goal of selling you everything you need in your home and life is a big home run.
The company’s June 28 announcement that it would pay close to $1 billion to acquire online pharmacy PillPack knocked $11 billion in market cap from the nation’s three leading publicly traded drug store chains’ stocks … in a single day.
The Seattle behemoth has certainly become a company that can move markets. I expect the future to be a bright one for Bezos and company no matter where it chooses to set up its second headquarters. Even a Canadian HQ2 couldn’t slow it down.
Stocks to Buy Over $200: Equinix (EQIX)
Equinix (NASDAQ:EQIX) is my pick from the technology sector. Down 5% YTD, it’s not even keeping up with its diversified REIT peers.
However, anyone who has owned EQIX over the past five years — 21% annualized total return — has significantly benefited from the data center buildout that has been going on to support the growing cloud.
In March, InvestorPlace contributor and Finbox.io founder, Matt Hogan, discussed the six most inexpensive growth stocks to buy; Equinix was on his list.
“Equinix’s stock currently trades at $414.48 per share as of Tuesday [March 20], up 9.4% over the last year. On a fundamental basis, the company’s stock is trading at a 7.0% discount to finbox.io’s intrinsic value estimate,” Hogan wrote. “However, the average price target from 22 Wall Street analysts of $507.23 implies 23.2% upside.”
At the time, Finbox.io had a fair value of $444, providing investors with 7% upside. Now trading around $428, Finbox.io suggests it has 22% upside or fair value of $520.
With the public cloud computing market expected to grow by 22% in 2018 to $178 billion, the company’s data centers will continue to experience strong demand.
As long as Amazon and the rest of the major cloud participants continue to grow, so too will Equinix.
Stocks to Buy Over $200: Constellation Brands (STZ)
Constellation Brands (NYSE:STZ) is my pick from the consumer goods sector. Down 5% YTD, STZ stock is taking a snooze in 2018 after several years of outsized growth.
Since 2011, it has had some spectacular years on the markets — up by 30% or more on five out of six occasions — suggesting what’s happening now is a severe case of reversion to the mean.
Don’t fret if you own its stock and if you don’t here’s why you might want to take a closer look at the company best known for holding the U.S. rights to Corona beer.
You see, Constellation Brands paid $245 million last October to buy 9.9% of Canopy Growth Corp (NYSE:CGC), one of Canada’s best-known and largest marijuana companies. Today, that investment is worth almost four-fold that amount.
However, that’s not the best part of its investment. No, the best part is that it’s going to make cannabis-infused drinks using Canopy Growth’s expertise. As states come online and legalize recreational marijuana use, Constellation gains a new market to sell into.
That’s a big deal. More so than the $800 million profit, it has already made on paper. If you want to bet on marijuana, this is as safe a bet as they come.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.
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