3 healthcare stocks to buy and hold over the next 10 years
Just over a year after the stock market recorded its fastest recovery on record from a bear market bottom, investors are getting nervous about holding stocks. Interest rates are rising, politicians are playing chicken with the debt ceiling, and the high-flying tech stocks that have fueled a 113% run since the March 2020 lows are showing weakness.
That’s why i think Where is Medications (NYSE: WST), ResMed (NYSE: RMD), and Novo Nordisk (NYSE: NVO) are three big companies to consider buying long term. They are likely to continue to perform well no matter what the stock market does. Here’s why.
1. Western pharmaceutical services
One of the least reported stories of the pandemic has been the astronomical amount of supplies needed to immunize people around the world. Syringes, seals and caps had to be quickly manufactured and used to curb the pandemic. West is a leader in the creation of these injectable drug delivery systems. It designs and manufactures its own components, as well as those of others.
The company is well diversified in terms of geographies, products and customer types. About half of its business is carried out in the Americas region and three quarters of sales are its proprietary products. Of these, biologics and pharmaceuticals lead the way, with generic drugmakers making up the rest. As you can imagine, business is booming.
After posting mid-digit annual revenue growth over the past decade, sales for the first half of this year are up 37% from the same period last year. Net income is up 104%. It has repeatedly raised its forecast for the full year and now expects revenue of $ 2.77 billion, or 29% above 2020.
Management knows how to convert these additional sales into profit. Operating margins have steadily increased over the past decade. This is why earnings per share growth exceeded revenue growth by almost 6 to 1 during this period.
West Pharmaceuticals is a company that sells essential components to an industry that constantly improves our quality of life. With a management team who know how to profit from the extra sales, I think this is a stock that investors can feel comfortable buying and holding for a decade or more.
If asked to name a market leader with 15 million cloud-connectable medical devices, you could be forgiven for not naming ResMed. The provider of devices and masks for sleep apnea, chronic obstructive pulmonary disease (COPD) and other respiratory conditions only derives about 12% of its revenue from software as a service (SaaS). However, data from these devices is helping to drive innovation that improves both outcomes and the patient experience.
Like many businesses, the pandemic has created one-off effects for the business. In the case of ResMed, it was an advantage and a hindrance. Although many sleep clinics have closed for a while, the company tripled its production of ventilators last year to help treat patients with severe COVID-19. All of this totaled $ 3.2 billion in revenue for the fiscal year ending June 2021, up 8% from the previous year. The operating result increased by 12%. Both figures were well below its performance in the two years leading up to the pandemic.
I expect his performance to bounce back as things get back to normal. In fact, ResMed can do much better than its history suggests. Its main competitor – Koninklijke Philips NV (NYSE: PHG) – has seen the US Food and Drug Administration (FDA) recall many of its respiratory care devices.
CEO Mick Farrell said on the latest earnings conference call that demand for his machines had increased significantly since the action. Unfortunately, supply chain and component constraints limit the benefits the company will realize in the short term. Management expects additional revenue to flow during the March and June 2022 quarters.
Investors may have to wait until next year for this bump to materialize, but the company has an incredible long-term global growth path. Management estimates that there are 1.6 billion undiagnosed people worldwide who could benefit from its devices, and it aims to improve 250 million lives with out-of-hospital care by 2025. That should reassure people. shareholders on the fact that all the gyrations of the market are noise. compared to ResMed’s overall desirability.
3. Novo Nordisk
The World Health Organization estimates that the number of people with diabetes increased from 108 million in 1980 to 422 million in 2014. Some estimate the number at 463 million today. Projections show that the number will continue to increase. For many, that means taking insulin – a hormone that helps the body transport sugar from food in the stomach to cells. Novo Nordisk is one of three drugmakers that together control 90% of the insulin market. The others are Eli Lily (NYSE: LLY) and Sanofi (NASDAQ: SNY).
Despite the domination, the company continued to innovate. Although the insulin segment’s total sales declined in the first half of this year compared to 2020, its latest drugs have performed well. Rybelsus – a pill that patients take orally every day that mimics a hormone released after a meal – has seen its earnings increase by 187%. Sales of Ozempic, which helps the body lower blood sugar, increased by 47%.
Insulin is a big part of Novo Nordisk’s business – still around 42% of revenue – but that’s not all. Year-over-year sales in the obesity care segment increased 23% for the first half of 2021. This will be bolstered by the approval of Wegovy by the FDA in June. It is the company’s weekly injection that suppresses appetite and slows stomach emptying.
If you are looking for a company that offers stability, Novo Nordisk certainly has it. The company is one of the only manufacturers of a drug that keeps millions of people alive on regular dosing. This has resulted in a near doubling of earnings over the past decade, earnings per share more than tripled, and dividends that have quadrupled. In a market that seems nervous, maybe it’s time to add one of the world’s most trusted companies to your portfolio.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.