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Buying one of the most expensive stocks (by share price) on the S&P 500 seems like a lot of money.
For example, owning just one share of The Priceline Group Inc. (Nasdaq: PCLN) would cost $1,921.53. But some of these stocks aren't quite as "expensive" as they seem...
| Company | Stock Symbol | Price as of 1/30/18 |
| Priceline Group Inc. | PCLN | $1,921.53 |
| Amazon.com Inc. | AMZN | $1,437.82 |
| Alphabet Inc. Class A | GOOGL | $1,177.37 |
| Alphabet Inc. Class C | GOOG | $1,163.69 |
| Autozone Inc. | AZO | $776.67 |
These stocks are only considered "expensive" in terms of price per share. But there are a lot of ways to evaluate stock values, and these stocks may seem expensive when using different criteria to judge them.
For instance, an investor who heavily weighs the price-to-earnings (PE) ratio before buying a stock would never buy Salesforce.com Inc. (NYSE: CRM) at a PE ratio of 14,976.41.
But for those who value the potential of future earnings, the AMZN stock price may actually look "cheap."
An investor may not mind paying over $1,000 for AMZN stock if they believe the Amazon stock price can climb 72% in 2018, like it did over the last 12 months.
But even though a share price over $1,000 might not mean the stock is "expensive," there are two main reasons why investors want to own an expensive stock by share price...
One reason is they are chasing past returns. After all, the stock price for PCLN skyrocketed from $7.12 in 1991 to $1,921.53 today for a gain of 26,887.78% in 27 years.
Investors might be hoping those gains will continue into the future and are willing to pay the high share price.
Another reason investors buy expensive stocks is because they tend to have lower trading volumes and thus fewer volatile price swings. High prices can also encourage long-term ownership, according to Reuters.
For example, the trading volume for the "hot" tech stock Advanced Micro Devices Inc. (Nasdaq: AMD) was 44 million on Jan. 30, 2018. The price opened at $13.24, and at one point, it dropped 4.15% to an intraday low of $12.69.
Because the AMD stock price is affordable, more investors might be trying to make short-term profits.
In comparison, Priceline group had a trading volume of just 361,000 on Jan. 30, and the most the stock dropped in its intraday low was just 0.35%. Traders hoping to flip stocks for short-term gains are likely going to target stocks with lower share prices so they can control more shares.
And that leads to an important question we receive a lot...
Should I Buy the Most Expensive Stocks on the S&P 500?
Money Morning readers always need to have a long-term outlook to find the biggest profit opportunities.
Four years ago, on Jan. 31, 2014, the PCLN stock price was trading for $1,144.89 per share. At the time, that seemed expensive.
But the Priceline stock price climbed 67.83% since then, and it now trades for $1,921.53 per share.
If the price climbs another 67.83% in the next four years, PCLN will trade for roughly $3,200 per share by 2022, making today's prices seem "cheap."
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Of course, just because a stock is expensive doesn't make it worth buying.
That's why today, we're sharing all the details about two stocks on this list that Money Morning Director of Technology & Venture Capital Research Michael A. Robinson likes the most.
Michael's been a giant in tech investing for more than 30 years. As a leading analyst and tech journalist, he's been on the forefront of just about every major emerging technology story of the last decade.
He's even been nominated for a Pulitzer Prize.
His privileged access to technology-pioneering CEOs... prize-winning scientists... and high-profile industry insiders has allowed him to consistently give investors huge gains on remarkable breakthroughs like 3D printing, the mobile wave, and shale energy technologies well before anyone else.
Those who listened to his recommendations on rare earth metals, for example, would've seen cumulative gains of 990% in just 16 months.
That's why, when he has something to say about profit opportunities, we always listen.
And he says two of the most "expensive" stocks in the S&P 500 are actually "cheap" thanks to their explosive profit potential...
The Top Two Stocks to Buy on the S&P 500
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One of Robinson's favorite stocks on the list is Amazon.com Inc. (Nasdaq: AMZN).
"Analysts thought Amazon.com should stick to its knitting as an online store," Robinson said in a 2016 report.
"But what (Jeff) Bezos knew, and the Wall Street crowd missed, was something called the power 'of scale.'"
Amazon started out as just a bookseller in 1994, but now 80 million people use Amazon Prime to stream movies and video, listen to music, and shop for groceries and household products.
And the e-commerce giant isn't stopping there.
Next on the horizon is the $3.3 trillion healthcare market...
On Jan. 30, Amazon announced a partnership with Berkshire Hathaway Inc. (NYSE: BRK.A) and JPMorgan Chase & Co. (NYSE: JPM) in a healthcare venture.
5 Facts You Didn't Know About Amazon
The partnership will use technology to provide accessible healthcare at reasonable costs.
And as we've seen with online shopping, media, or grocery stores, Bezos can dominate any industry he wants to.
While we don't have any hard estimates how this will add to Amazon's bottom line, the potential is staggering. If Amazon can dominate healthcare like it has with online shopping, there's over $3 trillion to be had.
Robinson's other favorite stock on this list is GOOGL.
Editor's Note: This is the difference between GOOGL and GOOG.
"It's precisely the kind of investment I mean when I say, 'The road to wealth is paved with tech,'" Robinson said back in 2015.
"That means this 'Berkshire Hathaway of the Internet (and the Future)' is the kind of foundational stock you can count on for the long haul."
At the time, shares of GOOGL were trading for $644.04 per share. From today's opening price of $1,183.81, that's a profit of 83.81% over the last three years.
In comparison, the Dow Jones Industrial Average has only climbed 59.59% during that time.
But if you missed out on those gains, it's okay.
Robinson expects even more gains in the future thanks to Alphabet's "Trojan Horse."
Alphabet released its new smartphone, the Pixel 2, in October 2017.
"Let's say the Pixel captures just 5% of the global market for smartphones. That would give it sales of 75 million units a year. And at a conservative $650 average selling price, we're talking $48 billion in new yearly sales," Robinson said in October 2017.
But the tech expert believes the bigger profit opportunity is in the Pixel 2 introducing consumers to Google's other products and services.
"The company is taking a page out of Apple's playbook and making the Pixel the central piece in its hub-and-spoke software strategy," Robinson said.
Right now, Google is creating an "ecosystem" through its hardware. If you buy an Apple smartphone, you can stream songs through Apple Music, a streaming service that costs $9.99 per month.
Now, with the Pixel 2, smartphone owners will be introduced to Google's entertainment services. Alphabet has its own music service called Google Play Music. It can be used on a phone, tablet, computer, or smart TV.
Google Play Music costs $9.99 to stream millions of songs.
Now, we don't have any hard projections, because the Pixel 2 just launched at the start of October. But if Alphabet sells 75 million phones a year and just half of those customers sign up for Google Play Music, that's an extra $4.4 billion per year in revenue.
That puts a potential total of $52.4 billion per year in new revenue and an extra $13.1 billion per quarter all thanks to one phone.
And when Google starts adding more smartphone customers, they will be more inclined to use Google's other hardware products, like Apple users do with iPhones, iPads, and the Apple Watch.
Google has a smart thermostat, Chromebook laptop, Wi-Fi router, smart speaker, and web-streaming box for Pixel users to grow their Google ecosystem collection.
That means even more potential revenue in hardware sales.
And while Google and Amazon have extraordinary potential, those aren't the only profit opportunities out there.
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