Today, we will discuss the most expensive stock in the stock market. We’ll also discuss the other top five most costly stocks. We’ll also ask, “In a world full of metrics, how do we define expensive?”

Contents

2 – Lindt & Sprungli AG – $9800 per share 5 – Seaboard Corporation, $3000 per share 4 – Alphabet – $1.19 trillion 5 – Facebook – $0.78 trillion 1 – Tesla P/E = 1,400 2 – Valero Energy – P/E = 940 5 – Phillips-VanHeusen Corp – P/E = 320

Table of Contents
The most expensive stock is…
Why is the price of Berkshire Hathaway so high?
What does Berkshire Hathaway do?
Share Price: Is it the best metric?
Market Capitalization
Price-to Earnings Ratio
The Most Expensive Stocks By Share Price
The Most Expensive Stocks By Market Capitalization
The Most Expensive Stocks By Price to Earnings Ratio
The Most Expensive Stocks
The most expensive stock is…
Berkshire Hathaway Inc., headed by Warren Buffett as CEO, is the most expensive stock. Berkshire Hathaway stock is currently priced at around $350,000 per share.

Lindt & Sprungli AG is the next-closest stock on the Fortune 500 list or the S&P 500 Index, etc. The well-known Swiss chocolatier company. Currently, their stock price is about $10,000 per share.

Below, we’ll discuss the other top five.

Why is the price of Berkshire Hathaway so high?
Most companies decide to divide their stock as they grow. Every stock worth $10 is split into two stocks each worth $5. The stock can be traded easier with this splitting, just as it is easier to buy groceries using $10 bills than $100 bills. Trading is easier with smaller units.

Stock splits have been implemented by many well-known corporations, including Apple Computers Alphabet Inc. and Amazon, at various points in their history. Berkshire Hathaway, however, has never done so. Chipotle Mexican Grill and other popular companies have not split.

The value of these companies is spread over the few shares they originally went public with. The shares are therefore worth more.

Berkshire Hathaway launched “B class” share in 1996. These shares produce the same results as a stock splitting. The B shares are 1/1500 the value of an A share. The B shares are only a fraction of the price. This is much more affordable to the average investor.

In 1962, Berkshire Hathaway shares A were valued at $7.50 per share. Warren Buffett, a young man at the time, invested his first money in the company. Buffett became the CEO of the company after gaining a controlling share in 1965. Since then, the company has grown by 46000 times.

Berkshire’s stock is the most expensive on the market because they have never split the A shares.

What exactly does Berkshire Hathaway Do?

What does Berkshire Hathaway do?
Berkshire Hathaway, a holding company. It’s another way of saying that it is a holding company. Berkshire Hathaway owns dozens of companies, many of which you may have heard of.

Berkshire owns a number of companies, including:

GEICO
Duracell
Fruit of the Loom
Pampered Chef
Dairy queen
Berkshire owns a minority stake in companies such as:

Apple
Coca-Cola
Kraft-Heinz
American Express
Bank of America
Berkshire Hathaway owns and runs several companies that bear its name. These include Berkshire Hathaway HomeServices of America, Berkshire Hathaway Direct Insurance Company and Berkshire Hathaway Direct Insurance Company.

There may be some signs bearing the Berkshire Hathaway brand in your area.

Berkshire Hathaway has the “job” of ensuring that its companies perform well. Berkshire Hathaway and its investors will make more money if these companies perform well.

When all of your subsidiaries are profitable, it’s easy to have the most expensive stock.

Share Price: Is it the best metric?
Purists in the stock market would disagree that share prices are the best way to compare expensive stocks. Why?

Stock splits are a good example. Stock prices will be lower for companies that decide to divide their stock into smaller fractions. Stock splitting has no effect on the intrinsic value of a company.

Imagine someone saying, “White Bread is the most expensive of all breads.” Look at this! “This entire loaf of white wheat bread is more expensive than a single slice of white wheat bread.”

You might say, “That’s crumby.” The wheat bread was split. It’s not logical to compare a loaf with a slice. We need to compare the price of bread on a level playing field.

A small company could end up on a list such as this if it doesn’t split its shares.

Some companies are mentioned in articles about “most expensive stocks” simply because they have never split their stock and, therefore, have a high price.

What is good marketing? Good marketing?

You’re right. Let’s look at the market capitalization and price-to earnings ratio.

Market Capitalization
Market capitalization measures the value of a company on the stock exchange. Market capitalization = total capital on the market.

The equation to find market capitalization, or market cap, is simple. Multiply the number of shares in a company by its price per share.

It is not enough to have a high stock price, like Berkshire Hathaway. A high stock price must be combined with a large number total of shares.

Math geeks may also be aware that a split in stock does not impact the market cap. A company that has 1 billion shares priced at $6 each, has a $6 billion market cap. If the company splits into two, it would have 2 billion $3 shares, which multiplied to $6 billion.

A company with a large market cap may still be a good buy. The market cap tells us only about the price. It does not necessarily reflect intrinsic value. Let’s look at the price-to earnings ratio.

Price-to Earnings Ratio
Benjamin Graham, one of the founding fathers of modern investment, urged his students to distinguish between value and price. You should read the famous Mr. Market parable if you haven’t already.

Price is simply an opinion extrinsic that the market decides. Value is intrinsic, and it is based on fundamental business principles.

A Honda Civic may be a great car, but it is priced too high at $100,000. The car’s value could be more like $15,000 or $20,000 It is hard to estimate the cost of owning a car.

Back to stocks. How can we calculate the intrinsic value of an individual stock? Benjamin Graham says that one of the best methods is to examine the company’s profits.

What was the profit of the company after all expenses were paid? This is the company’s earnings.

You would want to pay as little as possible for the most value. Or, the lowest price to get the highest profits. The price-to earnings ratio is a measure of this. Divide the price of a share by its earnings per share.

A high P/E ratio is usually a sign of a bad deal. A company’s price is too high or its earnings are too low. A low P/E is the opposite. It represents a high price in comparison to high earnings.

Let’s return to the example of the car. A Lamborghini will be more expensive if you only consider price. If the Lamborghini cost $100,000 and the Honda Civic cost $90,000. You would be hesitant.

The Civic is overpriced in comparison to its value. This particular Civic, which is overpriced, is in some ways the more expensive vehicle.

The Most Expensive Stocks By Share Price
Berkshire Hathaway Inc. was already the most expensive stock. Let’s look at the other top five stocks ranked by share price. They are as of January 2021:

Lindt, a Swiss chocolate manufacturer, is famous for its Lindt Truffles and Lindor sweets. The company, like Berkshire Hathaway has never divided its stock.

Lindt is a great example of how the share price may not be the best way to determine a company’s worth. Their market capitalization is only about $20 billion. Over 100 publicly traded companies are larger.

Even so, the chocolates they make are still delicious.

NVR Incorporated, #4 – Shares at $4000 each
NVR is a home builder and mortgage company in the United States. NVR has recovered well from the COVID-19 stock downturn. The company is now above its pre-COVID levels.

Yes, high share price. NVR’s current P/E is around 19. This is considered to be on the lower end. NVR could be a great investment at the moment.

Amazon.com shares at $3300 each
Amazon is one of those companies that…let’s face it, doesn’t need an introduction! Amazon, unlike Lindt or NVR, has a combination of a high stock value and a number of stocks. Amazon’s stock market capitalization, therefore, is enormous–$1.6 trillion. This is 80 times larger than Lindt. This just shows that stock prices aren’t everything.

Seaboard Corporation is a conglomerate of agricultural and transportation companies. They transport and produce products such as wheat, sugar, and pork. Ironically, they are best known for their fleet cargo ships.

Seaboard, however, is a very expensive stock. On the market cap spectrum, however, Seaboard is quite small. The company’s value is about $3.5 billion.

The Most Expensive Stocks By Market Capitalization
These companies are the largest companies in the world. These companies have high prices, tons outstanding shares, millions customers, and well-known products.

While their stock price might not be very high, their investors own a part of the “most expensive” companies.

You would have been a winner if you had made an investment in these companies when they were just starting out! We calculate our retirement goals year by year.

Apple: $2.25 trillion
Apple is the leading smartphone manufacturer in the entire world. Apple sells more than just iPhones. They also offer top-of the-line computers, tablets and wearables.

Apple’s products are cultishly revered by many of their customers.

Apple’s market capitalization has more than doubled in the last decade.

Microsoft: $1.68 trillion
Microsoft’s personal computer software suite includes Word, Excel PowerPoint, Outlook and Skype. Microsoft is used by people all over the world to perform daily tasks, such as tracking business expenses and creating college presentations. Yes, you can use Microsoft to create Internet articles.

Microsoft’s market cap has soared since mid-2010s when they switched to a subscribing model. From 2000 to 2015, the company’s market cap was relatively stable. Since then, it has increased by almost 400%.

Amazon: $1.63 trillion
Amazon is Jeff Bezos’s famous Internet startup-turned-megalith. Amazon is a popular company that many of us use every week. We see Amazon trucks on our streets and we can also watch or listen to music using Amazon’s services at home. Amazon has become a part of our everyday lives, just like the companies listed above.

4 – Alphabet – $1.19 trillion

Alphabet is the only company that might not be familiar to you. Why? Google created in 2015 a parent company named Alphabet and made Google its subsidiary. When you see Alphabet, it’s Google under a different name.

How does Google make money? Advertising.

Google sells your information to advertisers when you use its search engine and surf the internet. Knowing what people are searching for on the Internet is a lucrative business.

5 – Facebook – $0.78 trillion

Facebook is a place where you can connect with old friends, share photos, and argue with people who you haven’t spoken to in ten years. Facebook is by far the most popular social networking website in the world.

Like Google, they make money through advertising. Facebook uses Facebook to keep you on Facebook. Google looks at your browsing behavior to see what you may want to purchase.

Facebook wants to make the website as fun as possible. Facebook will serve more ads the longer you stay on their website. More ads means more money.

The Most Expensive Stocks By Price to Earnings Ratio
P/E is a good metric to determine the “most expensive stocks” as we discussed previously. The average historical P/E ratio has fallen to around 15 in recent years. In recent years the average P/E has risen towards 20. Any price around 25 is considered to be overpriced – too high a price and too low earnings.

This is not the whole story. Some companies are defined by their potential for growth in the future. Tesla is the perfect example.

Tesla’s third-quarter 2020 earnings (over 948 millions shares) were just $330 million. This is about 35 cents a share for the quarter, or $1.40 a share over a full year. How can $700 be justified as a stock price?

Investors predict that Tesla’s profits will continue to grow each year. Investors believe that a $700 share price will eventually be justified by substantial earnings.

To have a P/E ratio of 20 for a stock worth $700, the company must earn $35 per share. This is 25 times the current earnings of Tesla. Elon Musk has a rocketry side business. Could Tesla’s earnings skyrocket?

In general, smaller companies tend to have higher P/E. They are still growing. The paws are too big for the body. When we see large corporations with high P/E, this could be an indication that the company has been overpriced. Let’s look at the top five large companies in the S&P 500, ranked according to their P/E (past twelve months of earnings).

1 – Tesla P/E = 1,400

2 – Valero Energy – P/E = 940

In 2020, both Valero, and the company that follows, Exxon suffered huge earnings losses. This has nothing to with COVID 19 Another global issue has occurred.

OPEC, a long-standing international oil organisation, ended its March 2020 summit in bad terms. Both Saudi Arabia and Russia felt that the other country demanded unfair terms.

The two countries responded by engaging in a price-war, drilling more than usual to lower the price and possibly “put out of business” the oil industry of the other country.

Exxon Mobil, Valero and other companies have been affected by the fall in oil prices worldwide.

Investors believe that oil will eventually rebound and that both companies will recover. Their P/E ratios are still high despite their low earnings.

Exxon Mobil P/E = 690
See below.

ServiceNow Inc. – P/E = 450.00
ServiceNow, a cloud computing firm based in Santa Clara (California), is an American company. The company provides an IT service management platform-as-a-service (PaaS) to other companies. Stock prices doubled by 2020, mainly due to the potential for future growth.

ServiceNow will provide IT support for digital and remote employees as more and more companies move digital (particularly in the COVID 19 remote working environment). The growth potential of ServiceNow is enormous. The stock price already appears to reflect this growth.

5 – Phillips-VanHeusen Corp – P/E = 320

Phillips-VanHeusen Corp. is an American clothing and fashion conglomerate. The company’s earnings for 2020 are expected to drop significantly due to COVID 19, and the limited fashion spending of consumers.

The stock price is up 200% from the March 2020 lows.

The Most Expensive Stocks
What should we do with the most expensive stocks? By share price? By share price? By market capitalization?

In either case, the company with the most expensive shares is one that has a well-known name. Berkshire Hathaway, Warren Buffett’s firm, is the most costly stock in terms of share price – almost $350,000 each.

Apple is the most expensive stock by market capitalization–$2.25 trillion. Tesla is the most costly stock by P/E (at least among S&P 500 companies).

Stocks at record highs aren’t always bad. Remember that the optimism of the market towards a particular company is already reflected in its price.

Happy investing and good luck!

This article was originally published on Wealth of Geeks. It has been republished by permission.