Which stocks to invest in right now will give the best returns? It's impossible to say for sure, but three good stocks to invest in now could provide great rewards to investors over the long run: Colgate-Palmolive Company (NYSE:CL), Facebook (NASDAQ:FB), and Vertex Pharmaceuticals (NASDAQ:VRTX).
These stocks are in totally different industries and there are very different reasons why an investor would buy them. Here's why Colgate-Palmolive, Facebook, and Vertex look like good picks right now.
When anxieties increase, many investors like the relative safety of a consumer staples stock like Colgate-Palmolive. For example, during the huge market crash of 2008 and 2009, Colgate-Palmolive declined roughly 30% from its peak level while the S&P 500 index dropped more than 50% from its peak.
Colgate-Palmolive isn't just a defensive play, however. Wall Street analysts think the company will produce solid annual earnings growth of more than 8.5% over the next five years. That's significantly higher growth than Colgate-Palmolive generated over the last five years, a period in which the stock rose 50%.
There's one other reason Colgate-Palmolive stock could move higher: It could be an acquisition target. Rumors are swirling that The Kraft Heinz Company (NASDAQ:KHC) is interested in buying Colgate-Palmolive. Other big players have also been mentioned as potential suitors. While acquisition rumors are not a good reason for investors to buy a stock, the fact that Colgate-Palmolive could be so attractive to larger companies underscores why it's a good pick for regular investors also.
Facebook is anything but a defensive stock pick. Shares of the social-media giant have soared in recent years and are up solidly so far in 2017. Over the last few days, though, technology companies have been beaten down a bit. I think this makes for a great opportunity to load up on Facebook stock.
The stock might look expensive at first glance, with shares trading at 25 times expected earnings. However, Facebook's growth prospects are so strong that the stock really isn't priced terribly high. When most people think about Facebook, they think about its popular social network -- or the one that it bought, Instagram. Possibly the biggest opportunity for Facebook, though, is in virtual reality, an area where the company is already a leader.
While Colgate-Palmolive is a potential acquisition target for companies, Facebook is likely to be an acquirer of companies in the future. The company has a cash stockpile of over $32 billion, including cash, cash equivalents, and marketable securities. Facebook also has no debt. Its balance sheet gives the company flexibility to make pretty much any strategic acquisition it wants to do.
You might think Vertex is a strange fit in this group of stocks. The biotech only recently became profitable. Vertex shares trade at 39 times expected earnings -- way more expensive than either Colgate-Palmolive or Facebook. So why is Vertex a good stock to invest in right now? Growth... and lots of it. The biotech could realistically grow its earnings by more than 60% annually over the next few years.
Sales for Vertex's cystic fibrosis (CF) drug Orkambi are taking off. Sales for the company's first CF drug, Kalydeco, also continue to grow. However, the two drugs are approved to treat only around 40% of CF patients in North America, Europe, and Australia.
Vertex's goal is to reach the rest of the potential CF market. Its next step in achieving that goal is to file for regulatory approval in the third quarter of 2017 for a combination of tezecaftor and Kalydeco. Vertex reported impressive results from the CF combo treatment earlier this year. The company is also evaluating several other drugs in clinical studies for treating CF.
Keith Speights owns shares of Facebook and The Kraft Heinz Company. The Motley Fool owns shares of and recommends Facebook. The Motley Fool recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.