Many assume that the FAANG stocks, Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Alphabet (GOOGL) are the higest value stocks, but these market players suffered in 2018 amidst market turmoil. Here's a look at the most expensive stocks as of April 2019.
TUTORIAL: Investment Valuation Ratios
Berkshire Hathaway (NYSE:BRK.A) $307,800
Berkshire Hathaway has the highest shares on the New York Stock Exchange. The company holds the top position mainly because it does not split its shares. Some companies split shares to keep the price down to encourage trading. Normally, a company will complete several 2;1 splits over the years, which doubles the shares outstanding but also cuts the price in half. Famous investor Warren Buffett keeps the share price high to deter short-term traders from creating excessive volatility. There is a lower priced option with Berkshire Hathaway B shares (NYSE:BRK.B), which trade around $205. These stocks at one point were $3,000 per share until a 50;1 split in 2010.
Buffett created the Berkshire Hathaway holding company. The company is so big it acquires buildings, factories, and gobbles up whole companies. A multinational conglomerate, Berkshire owns retail, insurance, railways, and furniture stores. The company is a multinational conglomerate, and its subsidiaries include GEICO, Heinz (KHC), and BNSF Railways.
Seaboard Corporation (NYSE:SEB) $4,325
Seaboard Corporation went public in 1959 through a merger with Hathaway Industries, Inc. It operates in several areas including agribusiness, commodity trading and milling, ocean transportation, pork production, and energy production in the Dominican Republic. Seaboard Corporation has never split its shares.
NVR, Inc. (NYSE:NVR) $2,752
NVR is a homebuilder and mortgage banking company based in Virginia. Some of the company's subsidiaries include Ryan Homes, Fox Ridge Homes, and NVR Mortgage. NVR, Inc. has also never split any of its stock. NVR shares took off in the early 2000s just as the tech bubble was popping. Shares went from $70 to approximately $700 in a span of 10 years.
Booking Holdings, Inc. (NYSE: BKNG) $1,762
Booking Holdings Inc. owns multiple travel companies including Agoda, Priceline.com, Booking.com, Kayak.com, Rentalcars.com, and OpenTable. Formerly known as the Priceline Group, it changed its name in 2018 to reflect its extensive reach in the online travel and entertainment market. Priceline held its initial public offering in 1999 at $16 per share. The IPO occurred in the last stages of the dotcom bubble. About a month later the stock jumped to $120 per share. The bubble burst and the price dropped to around $1.30 by 2001. In 2003, the company initiated a reverse split (1:6), which meant that every six shares were now one share, but that one was worth six times the price.
Amazon (Nasdaq: AMZN) $1,813)
Jeff Bezos's Amazon holds its own among the top stocks on the market, with a price of around $1,800 a share. As one of the most expensive and lucrative stocks on the market, Amazon is one of only two FAANG stocks in the top 12 most expensive.
Markel Corporation (NYSE: MKL) ($982)
Markel Corporation is an investment, insurance, and reinsurance holding company. The company's stock boasts a price tag of around $980 per share.
Alphabet (Nasdaq: GOOG) ($1,192)
Coming in a little behind Amazon, Alphabet, the parent company for Google, still has a hefty stock price of around $1,200 per share. Alphabet has had some luck in the market with shares rising despite trade war discussions between China and the United States.
White Mountains Insurance Group, Ltd. (NYSE: WTM) $923
White Mountains Insurance Group's stock price sits at around $920 per share. The group is a financial services holding company based in Bermuda focusing on insurance and reinsurance. Buffett began investing in insurance companies in 1967, which marked the start of Berkshire Hathaway's ascension.
I once heard a friend say to stay away from stocks with prices over $200 because a $200 stock would need a $40 increase in price to gain 20%. It would be much easier for a $20 stock to move $4. For the record, this is not true, sort of. A lower priced stock can be more volatile, but the value of a stock is based on many factors.
Penny stocks, for example, will usually have low volume and can be very small companies. There is often less information available and less coverage by analysts. A single event or a few speculators can easily create huge jumps or drops in share price.
Low prices do not always imply a small company. Take Synovus Financial Corp. (NYSE:SNV), which trades around $35 per share. Because the company has 159 million shares outstanding,it has a market capitalization of $4.1 billion. Ultimately, the price is based on what that share represents: partial ownership in the company.
Finding the true value of these shares requires an examination of a variety of metrics, most of which are calculated per share, to make it easier to compare their stock prices. For example, a popular metric is the price to earnings (P/E) ratio. This ratio shows how much it costs to buy a portion of the company's profits. The lower the P/E ratio, the better the value; however, it is important to compare similar companies.
The true value of a stock goes beyond the price you pay, or even what you currently get for that price. The true value of a stock is a moving number based on future prospects. Any company can have an outstanding year, but its value can depend on projections. Analysts scrutinize figures such as the potential growth rate of the economy, the strength of the industry, and the prospects of specific companies. In the end, a high price does not always mean overpriced.