2 'expensive' stocks I'd buy today

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Randgold Resources

As a value investor, I find it much easier to buy cheap stocks than expensive ones. But this can mean missing out on big winners.

The best companies are rarely cheap, so I've recently forced myself out of my comfort zone to look at some of today's most expensive stocks.

The market leader

There's no doubt in my mind that the best quality gold miner on the London Stock Exchange is Africa-focused Randgold Resources (LSE: RRS). Led by founder Mark Bristow, this stock has delivered a 10-year gain of 545%, plus dividends.

I believe the continuing attraction of this company lies in the quality of its mines and its large scale. The company's threshold for developing a mine is that it must break even at a gold price of $1,000 per ounce. This policy helped the group to remain profitable during the post-2011 gold slump, when many other miners struggled.

A cash-generating machine

Today's half-year results confirm that the company's performance is still improving.

Profits for the period rose by 53% to $187.7m, despite the price of gold rising by just 1% to $1,237/ounce. The surge in profits was down to two factors. Production climbed 15% to 663,786 ounces, while the group's total cash cost per ounce fell 13% to $595.

This disciplined performance makes for a strong balance sheet. Net cash has doubled to $572.8m over the last 12 months. Some of this cash will be returned to shareholders through the group's annual dividend, which is expected to rise by 91% to $1.92 per share this year, giving a prospective yield of 2.1%.

The remainder of the cash will be held in reserve to fund the group's next big project -- Mr Bristow said today that "we are well on our way to achieving our goal of defining three new projects that pass our investment filters within five years"

A must-buy?

After climbing 3% today, Randgold shares trade on a 2017 forecast P/E of 30 with that prospective yield of 2.1%. This isn't a cheap share, but it offers long-term growth potential and a cash-backed, growing income. I'd consider buying at current levels.

Smooth sailing

The shipping industry is a sector where inside knowledge and experience is essential. It's prone to dramatic boom and bust cycles and many big operations are privately owned. This is why I believe the only sensible way to invest is through the shares of a well-established shipping services business.

One of my top picks in this sector is Clarkson (LSE: CKN), a UK-based name that's been trading since 1852. Its main lines of business are ship-broking and providing investment banking services for the sector.

The group's share price has bounced back from last year's lows, with a 12-month gain of more than 40%. However, I believe this stock still has the potential to deliver significant profits. The shipping market recovery is expected to gather pace over the next couple of years. Analysts expect Clarkson's adjusted earnings per share to rise by 10% in 2017, and by 21% in 2018.

Although the stock isn't cheap on a P/E of 24 and with a yield of 2.5%, the group's dividend has increased each year for the last 14 years. I rate Clarkson as a buy-and-hold stock with growth potential.

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Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.