The group of stocks that trade for four digits or more per share now includes two more: Priceline.com (symbol PCLN) and Google (GOOG). They join Berkshire Hathaway (BRK-A) and Seaboard (SEB), a little-known agribusiness and shipping company. To a great extent, their lofty prices are a result of the companies’ refusal to split shares. On a price-earnings basis, none of the stocks is terribly out of line with the market as a whole.
Google’s search-engine business, the main driver of growth, is on a roll. The third quarter of 2013 marked the 15th straight quarter that Google’s core business posted year-over-year sales gains of at least 20 percent. Analyst Mark Mahaney of RBC Capital Markets sees more strong growth ahead. That’s because though the company gets some 70 percent of global ad-search revenue, less than 20 percent of global advertising dollars are spent on the Internet, he says.
Although Google shares jumped 49 percent over the past year, they’re not unreasonably priced. At $1,058, they trade for 20 times estimated year-ahead earnings. Mahaney says that in his best-case scenario, the stock could hit $1,300 within a year.
Priceline’s stock surged 80 percent over the past year, to $1,181. Like Google, Priceline has posted 15 straight quarters of 20-percent-plus revenue gains (through the second quarter of 2013). The online travel company is best known for a “name your own price” feature and goofy advertising starring actor William Shatner. But more than half of Priceline’s sales are international, with the bulk in Europe.
Although Priceline’s growth will slow eventually, analysts still see heady earnings gains of 20 percent annually over the next few years. Analyst Tom White of Macquarie Capital calls Priceline a “top pick” in the online travel sector because of its consistent performance, opportunities in emerging markets and reasonable share price of 21 times estimated profits for the next four quarters.
Berkshire Hathaway, the vehicle for Warren Buffett, has never split its primary shares, which sell for $173,500. (The firm’s Class B shares trade at a much more accessible price of $115.) Both have risen about one-third in the past year, as Berkshire’s stable of businesses has recovered along with the U.S. economy. Morningstar analyst Greggory Warren believes the stock’s current “fair value” is 20 percent higher.
Seaboard, at $2,740, is the smallest member of the four-figure club, with a market value of $3.3 billion. The Shawnee Mission, Kan., firm gets its $6.2 billion in annual sales from commodities trading, pork production, a container-shipping business (which gives the company its name) and even a power plant in the Dominican Republic. The stock, which isn’t followed by any brokerage analyst, trades at 13 times the past year’s earnings.David Milstead is a freelance writer for Kiplinger’s Personal Finance magazine. Send your questions and comments to email@example.com. And for more on this and similar money topics, visit Kiplinger.com.