Stocks that can stand the test of time and produce market-beating returns along the way don't exactly fall out of the sky. Our contributors, though, think that the biotech Celgene (CELG), the healthcare giant Johnson & Johnson (JNJ 0.22%), and the medical device behemoth Medtronic plc (MDT -0.21%) are all outstanding stocks to own for at least the next two decades, and perhaps longer. Here's why.
This biotech has no real peer in terms of growth
George Budwell (Celgene): Since its IPO in 1987 roughly 20 years ago, Celgene has successfully developed three blockbuster cancer products (Abraxane, Pomalyst, and Revlimid), and a blockbuster inflammatory disease drug (Otezla). The net result is that this biotech has grown its top-line at a CAGR exceeding 21% over the past six years, making it one of the fastest growing large cap companies in the world.
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While the company's past is impressive and certainly worth rehashing, the real reason Celgene is worth buying and holding for the next 20 years is because of its dedication to maintaining a top flight growth trajectory moving forward.
By acquiring Receptos in 2015, for instance, Celgene added a potential best-in-class therapy called "ozanimod" for both multiple sclerosis and ulcerative colitis. This single experimental drug has the opportunity to generate peak sales of between $4 to $6 billion, and become a cornerstone product for the company in the years to come.
Most importantly, though, ozanimod has the power to greatly diversify the biotech's revenue stream outside of oncology, and drive growth through rising sales volumes -- thereby reducing the risk of any radical changes to the industry's pricing schemes going forward.
As another prime example of Celgene's dogged pursuit of upper echelon levels of growth, the company also signed critical development deals with AstraZeneca and Juno Therapeutics, among others, to ensure that it has a seat at the all-important immuno-oncology (I-O) table.
Although the exact monetary value of these agreements isn't altogether clear at this point due to the rapidly evolving I-O landscape, the more important issue is that Celgene should eventually have a significant footprint in this ultra high-growth drug market because of its aggressive pursuit of external pipeline opportunities.
In all, Celgene's outstanding growth profile appears to be built for the long haul. That's why I think this biotech is an absolutely great stock to buy and hold for the next 20 years.
130 years and counting
Keith Speights (Johnson & Johnson): Twenty years is practically a blink of the eye to Johnson & Johnson. The healthcare giant has been in business for 130 years -- and almost certainly will still be thriving decades from now.
Johnson & Johnson is really three businesses combined into one. The company has three segments, each of which would be a member of the S&P 500 if it were an independent entity. J&J's pharmaceutical segment generates the most revenue and the most profit. This segment also is the major driver of the company's growth. Although the other two business segments, consumer and medical devices, aren't growing sales much, they both contribute significant cash flow for J&J.
The company's cash flow enables Johnson & Johnson to reward shareholders through dividends and share buybacks. J&J has increased its dividend for a remarkable 54 consecutive years. This cash flow has also allowed the company to accumulate a large cash position, and J&J hasn't been shy about using its cash to make strategic acquisitions to foster more growth.
A company that can generate plenty of cash flow with a diversified product line is one that should stay in business and continue to grow for a long time. That's what Johnson & Johnson has done in the past. It's what the company is doing now. I think J&J will continue to do so in the future.
Medtronic: A 21st-century winner
Cory Renauer (Medtronic): I've been holding shares of the world's largest medical device company for years, and I'm looking forward to the next couple decades. Following the passage of the 21st Century Cures Act late last year, I'm even more confident in its ability to provide market-beating returns over the long term.
Medical research and pharmaceutical industry deregulation may have grabbed the biggest headlines, but the medical device industry could be one of the legislation package's key beneficiaries. Medtronic's ability to speed new devices to the market has been a thorn in the side of smaller device manufacturers trying to gain a foothold in this cutthroat industry for years. The Cures Act included the formation of a "breakthrough device" designation similar to the breakthrough therapy designation enacted in 2013. In a nutshell, it could speed up the review process for devices deemed a significant improvement over existing (or non-existent) options for patients with serious diseases.
Following its acquisition of Ireland's Covidien, and subsequent redomiciling to its low corporate tax jurisdiction, Medtronic is a one-stop-shop for hospital purchasing departments. In-depth knowledge covering a comprehensive array of products make its salespeople an indispensable resource for busy physicians. Its economies of scale also allow it to generate a profit at prices smaller competitors often can't compete with for familiar devices, an advantage that should allow it to produce outsized returns for the long run. In the near term, Investors will want to keep an eye on sales of the world's first artificial pancreas that launched late last year.
As icing on the cake, the stock offers a 2.3% dividend at recent prices. That's not the greatest yield right now, but you'll be happy to learn it's raised its payout by about 1,710% over the last 20 years. With a 39-year track record of annual raises and a leading position in its industry, hanging on to these shares for another 20 years should be a breeze.
