High-priced Stocks Worth the Money?
How much would you pay for the services of
Quite a bit, apparently. Those CEOs of
Many companies split their shares when they reach certain price levels to get more investors interested and to broaden their shareholder base. A typical 2-for-1 split turns a
Other companies could care less and let their stock prices escalate to hundreds of dollars. Their stocks are attractive enough anyway, and they figure that if investors are really interested, then they can simply buy fewer shares.
Then there are the bragging rights of investors.
"Owning a high-priced stock implies you have a very high-quality company and are in an elite group," said
The problem is that stellar stocks are often "priced to perfection," Hardesty cautioned. While they are capable of delivering short-run perfection, it is not certain that they can do so indefinitely. Stocks such as
"In every market cycle there are leaders and these leaders change over the years," explained
Firms such as
The psychological purchasing advantage of a lower price per share remains, though brokerage fees have become so competitive that buying fewer shares isn't quite the problem that it once was.
"You used to get a break on commissions if you bought a round lot of 100 shares, but that's changed in the past 20 years so it doesn't matter so much anymore," said
The king of high-priced shares is Berkshire Hathaway Class A (BRK.A) at almost
Analysis proves that paying a lot for Berkshire isn't such a bad idea.
The problem is that Berkshire has become so big that Buffett can no longer simply buy a stake in a company but rather must buy the whole thing in order to make a significant difference to Berkshire, Hardesty added. Another unavoidable consideration: Buffett is 80 years old.
Apple, with the rising potential of its iOS mobile operating system and its proven ability to attract new customers, draws upon the genius of
The moral: Some outstanding companies do merit a pricey stock, but every company must still be monitored.
For more investing and money advice, visit iHaveNet's Wealth section
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