Time to SELL These Highfliers? The 5 Most Expensive Stocks I Follow

It might be hard to believe based on how quickly fast growing stocks saw their price per share plunge after liberation day but the on again off again nature of tariffs have more or less not hampered high growth stocks which leads to what is probably a good problem in that many stocks that I follow are getting quite expensive and so in this video I'm going to go over of the stocks that I follow the five most expensive my name is Brian Stoffel at the time of this recording some of these stocks I own some of them I don't and I'll tell you more about that as we go along but first it's worth pointing out that I used to not pay that much attention to valuation and from 2010 until 2022 that worked out very well however in 2022 my portfolio fell precipitously and I decided to give more weight to valuation thus far it's worked out pretty well in 2023 the summer about two years ago I picked out five stocks that I believed were very expensive at the time it was Datadog Tesla Shopify Viva and MongoDB now over the next year I just follow it for one year because valuation is not always a long-term thing but a medium-term thing over the next year these five stocks unless I all of a sudden deemed them as cheap returned an average of negative negative 12 percent and then I also picked out five stocks in that very same time frame that I thought were quite cheap that I follow and those five stocks were Pubmatic CrowdStrike MercadoLibre Airbnb and Axon Enterprise and over the next year using the same year-long time frame as I did for the expensive stocks those stocks returned on average 50 percent and so the delta between these two the most expensive and the cheapest was a 62 percent delta there's significant outperformance now an n of one does not create something that gives me a ton of confidence but every quarter I have continued carrying out this experiment and so the next fall I did that I'll perform by 37 percentage points then in the winter I'll perform by 23 percentage points and then in last spring and look at this negative 15 percent versus positive 24 percent and a year ago I did this and look at this the five most expensive stocks averaged eight percent returns the five cheapest 66 percent returns and so I believe that is a track record that shows that this might be worth monitoring overall if you take those five and average them out my most expensive stocks have averaged a zero percent return while the cheapest 43 return over the next year so that is what has helped create a track record that has worked out very well doing great from when I started kind of recording my returns in late 2014 until 2022 and in 2022 that's when not focusing on valuation really hurt me I've recovered nicely since then and if you'd like to learn more about how I do this simply click the top link in the show notes below and you can get a copy of my free ebook about the adapt investing framework so let's jump into these five stocks coming in at number five is intuitive surgical a stock that I don't own but I did for a very long time now I released this to my private community and the price at the point that I did release this to them about a week ago was 554 dollars per share now why did I put well I assume that intuitive surgical can eventually get to a 33 percent free cash flow margin if it does that using a reverse discounted cash flow analysis that means that it needs to grow its revenue at about 19 percent per year for 10 years analysts expect it to grow at about 15 percent over just the next three so it earns a spot on the list coming in at number four is CrowdStrike company that just reported earnings now I actually came out this list before then and the price when I released this to my community was 487 dollars per share assuming that CrowdStrike can get a 38 percent free cash flow margin it needed to grow its revenue by 28 percent per year over the next 10 years to justify that stock price but it's only expected to grow about 23 percent over just the next three years let alone the next 10 coming in at number three is show up on the most expensive and cheapest list with some regularity because it is so volatile when I released this to my community it was trading at about 106 dollars per share now I'm assuming this company can get a 23 percent free cash flow margin but its beta is huge it goes all over the place that means its discount rate is rather high and I think that at 106 dollars it has to grow revenue by 30 percent per year that is a very very very aggressive assumption because it's nowhere near that right now it is worth pointing out it's worth pointing out that they have shown an ability to grow their subscription plans per month their price for a per month plan and not lose any customers and that is a very powerful gross margin lever that they can pull that said revenue is only expected to grow 22 percent which is well shy of that 30 percent bogey that I have now one other thing that could make this not seem quite as expensive is the fact excuse me that the company can not only raise its prices but it could have much better than 23 percent free cash flow margin so that is something to keep in mind number two most expensive stock is Tesla because look this company right now its free cash flow margin is not very high at all when I released this list to my community it was trading at about 350 dollars per share I gave Tesla in my calculations a 15 percent free cash flow margin which would be significantly more more than 50 percent higher than its all-time high watermark on an annual basis some might say that 15 percent is too low some might say it's way too high for a company that's primarily an automaker I split the difference this is also an incredibly volatile stock much like Shopify by my calculations this price assumes that it can grow revenue 32 percent per year over the next 10 years now I understand the hit and miss nature of this I understand that full self-driving autonomous vehicles the cyber cap optimists all play a role and they're not going to come out in a smooth and even fashion it's going to be rather lumpy that said 32 percent growth is what we're hoping for 13 percent growth is what analysts think those estimates you can kind of throw out the window this is a stock that I own and I should also say I own Shopify and CrowdStrike but I keep my allocation low at this point because I do think that the expectations are quite high right now before we get to number one I just want to remind you again you can click the top link in the show notes below get an absolutely free copy of my adapt investing framework where valuation does play a key role in this help me outperform the market my number one most expensive stock is the one that I've been saying is my highest conviction stock for much of the last eight years and that's an Exxon Enterprise company behind police stun guns body cameras and most importantly all the software that goes into making this hum switching costs are incredibly wide around this company when I released this to my community the stock was trading at about 750 dollars per share now I assume that this company can have a 30 free cash flow margin in the future back when it was just stun guns it was above a 20 free cash flow margin so if you add in that software I don't think it's unreasonable to assume that at the same time it needs to grow 29 percent per year to justify that stock price it's only expected to grow 22 percent over the next three years the big key here is Exxon recently came out with a AI era bundle and basically the average police officer's plan is about 300 dollars per period adding that AI plan which is incredibly important because it can help officers write a first draft of an incident report using AI saving incredible amounts of time if they adopt that that would increase the revenue per officer by 60 percent almost overnight and if adoption of that does happen quite rapidly and the total addressable market continues expanding this might not seem like such a bad deal which is why Exxon still remains one of my top five stocks in my portfolio that said I still think it is worth making sure I manage the size of my allocation because it is so expensive so of all the stocks that I follow and there's many more that are expensive that I don't follow these are the five most expensive I'm curious what are your five most expensive stocks that you follow put that in the comment section below and don't forget to hit subscribe so you can get the next list that comes out and in two days on Monday afternoon I'll be coming out with my five cheapest stocks