Many novice investors aspire to buy expensive stocks someday, believing that the higher their price, the more influential the investor is. Let’s discuss whether the price is important and what else you need to pay attention to when choosing stocks.
Why is the stock price not important in itself?
It may be impossible for most new and average investors to afford even a single share of the most expensive companies. However, this is not always a negative, as stocks with a high price may be more challenging to invest in and trade.
Most of us equate a stock price with its value since many of the most popular stocks come with hefty asking prices. The higher the asking price, the more desirable the company is for investment. Some firms have an unusually small number of shares, which could make the price of each one go up on the market.
However, the market capitalization (the number of outstanding shares multiplied by the share price) is not the same as the company’s entire market worth. The stock price of a corporation is meaningless unless its float is known. A company with ten shares worth $1 million each would be worth $10 million. Ten million shares at $200 apiece may be worth $2 billion for another company.
When the price of a company’s stock rises too high, the board of directors may decide to split them, which reduces the price per share while raising the total number of outstanding ones. This decision does not affect the company’s market value.
Except for over-the-counter (OTC) ones, which are not included in our review, let’s look at the five most expensive publicly traded U.S. stocks as of October 2022.
#1. Berkshire Hathaway, Inc.
- Stock price: $420,000.
- Market capitalization: $612 billion.
Berkshire Hathaway (BRK.A) has the highest stock price among US companies. It is also one of the world’s largest firms, consistently ranking in the top 10 by market value.
The original Berkshire Hathaway was a textile company, but Warren Buffett bought it and transformed it into a holding one. It owns many firms, including GEICO Insurance, BNSF Railway, and the chemical company Lubrizol.
As the firm’s CEO, Buffett kept the price high to prevent short-term trading that would exacerbate the stock’s volatility. At the same time, to facilitate the sale of stocks, he notably declined to divide Berkshire’s shares.
The company created a cheaper share class (BRK.B) in 1996. Customers can now invest in much smaller parts of the company. In 2022, Berkshire Hathaway shares trade for a more reasonable $280.83.
- Stock price: $4.035.
- Market capitalization: $13.3 billion.
The NVR Corporation (NVR) is a construction and mortgage banking firm headquartered in the Commonwealth of Virginia. The company has a presence in 34 cities located in 14 different states and the District of Columbia.
Ryan Homes, NVHomes, and Heartland Homes are the three brands operating within the organization. The production and distribution of construction materials by NVR’s building materials section aid the homebuilding division’s efforts.
The company also has two separate departments within its mortgage banking division. NVR Settlement Services manages the settlement and title transactions for the homebuilding division, while NVR Mortgage assists homeowners.
Similar to Berkshire Hathaway, NVR has never split its shares.
- Stock price: $3,500.
- Market capitalization: $4.2 billion.
Seaboard (SEB) is a multinational corporation that deals in exporting and importing food and agricultural products. Besides trading and milling, the company is involved in other commodity-related activities.
The firm expanded through a string of purchases, the first of which was a Kansas grain mill in 1918. Having merged with Hathaway Industries and gone public in 1959, the company is named after its new parent company and changed its name to Seaboard Allied Milling Corporation.
Kansas-based Seaboard now operates out of a global network of subsidiaries and non-consolidated, non-controlled affiliates.
- Stock Price: $2,300.
- Market capitalization: $44.6 billion.
AutoZone, Inc. (AZO) is a company that sells and distributes auto components. Its division, known as ALLDATA, sells diagnostic and repair software for automobiles, provides financing and logistics services for businesses, and more.
The firm has been around since 1979, and its headquarters are currently in Memphis. As of 2022, AutoZone operates 6,115 stores in the United States, 673 in Mexico, and 58 in Brazil.
#5. Texas Pacific Land Corp. (TPL)
- Stock Price: $2,050.
- Market capitalization: $15.8 billion.
TPL is a REIT that owns about 900,000 acres in 20 counties in West Texas. The firm was established as a land trust in 1888 when the Texas Pacific Railway Company filed for bankruptcy. TPL is still one of the largest private landowners in Texas, despite having sold over 75% of its original holdings since its inception. In 2021, the business switched its legal status from land trust to C Corporation.
Below, we’ve answered a few frequently asked questions from investors about high-value stocks.
Is the price of a company’s stock indicative of its worth?
A company’s stock price is the current asking price at which buyers and sellers are ready to exchange their shares. Therefore, the share price is not always indicative of the firm’s total worth. It reflects the company’s value in direct proportion to the change in its market capitalization.
What is the world’s most expensive stock?
The stock price of Berkshire Hathaway is the highest of any company in the world. It is primarily because Warren Buffett decided to forego a split while serving as CEO. As he saw it, a split would make the stock more volatile and lead to more short-term trading.
In stock market history, what was the biggest one-day profit?
In October 2008, after vehicle manufacturer Porsche made an announcement, Volkswagen stock rose more than any other company in a single trading day. The stock price went up by over 93% after Porsche said on October 28 that it had bought a 74.1% stake in the German manufacturer through futures trading.
The bottom line
Because of their high stock prices, investing in some companies may be out of reach for the average investor. For example, Berkshire Hathaway’s Class A shares are currently worth well over $400,000 as the company has refused to split them in the past out of a desire to preserve value and limit volatility.
However, the stock price does not necessarily indicate the corporation’s value. Consider the firm’s structure, products, and profitability to decide if it’s worth investing in.