Look Past Price

4/18/2011


Sometimes subscribers claim our stocks are too expensive.

In our mind, a stock is expensive when it trades at too high a price relative to earnings or cash flow. But some investors look through a different lens, as evidenced by a recent reader comment: "I can't buy Apple because it's too expensive for me to pick up 100 shares."

Such worries hark back to a time before discount brokers, when it was cheaper and easier to buy in 100-share lots. These days, most brokers charge the same commission whether you buy 300 shares or 30. Our portfolio weightings reflect this new reality. If you wish to invest $150,000 in our Buy List using those target weights, you'll own 23 shares of BlackRock ($195; BLK) and 235 shares of Corning ($19; GLW), both equating to positions of roughly $4,500. There is no magic — or investment value — in sticking to 100-share lots.

Our recommended lists currently feature seven companies trading at more than $100 per share. Don't let those prices scare you off. After all, while Walter Energy ($131; WLT) trades at a high absolute price, it's hard to call the shares expensive at nine times projected 2011 earnings.


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