As an investor, buying and holding stocks forever is the best way to make money in the stock market. While "forever" may seem like a long time when it comes to putting money in a single stock, it's eventually worth it.
By buying and holding stocks for a very long time, investors can take advantage of ongoing increases in stock price and capital gains -- both of which can make you wealthy. Identifying the long-term value that an investment will bring to your portfolio starts with evaluating past earnings and future earnings projections.
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Healthcare is a perfect place to seek "forever" investments because most non-biotech companies have decades of great history behind them. With that, here are the top three stocks on which to place your bets:
1. CVS Health
CVS Health (CVS -0.29%) is a healthcare company that offers a retail pharmacy, clinical services, pharmacy benefit management services, a specialty pharmacy, and digital services, among other things. Its mission is "to help people on their path to better health." This diversification is a key factor when choosing a stock to own forever; it helps a business withstand tough times, such as a pandemic.
In November 2018, CVS Health acquired Aetna, which now provides health insurance to thousands of patients. CVS is now the largest pharmacy chain in the country.
In the three months ending June 30, CVS Health reported a total revenue increase of 3% sequentially for its second quarter. Adjusted earnings per share were $2.64, compared with $1.62 the previous year. Performance looked good in nearly all of its segments, with the pharmacy, retail, and healthcare benefit (Aetna) segments reporting total revenue increases of $47 million, $215 million, and $1,065 million, respectively.
With solid momentum and an excellent dividend yield of 3.5%, which is well above the 2% investors can typically earn from an average S&P 500 stock, the future for CVS Health looks bright -- making this a great investment for a long-term portfolio.
2. Medtronic
Medtronic (MDT -0.21%) is one of the largest medical device companies on the planet. Providing products such as insulin pumps, cardiac devices, surgical tools, cranial and spine robotics, patient monitoring systems, and more -- used to treat 70 health conditions overall -- Medtronic's mission is "to alleviate pain, restore health, and extend life."
While the company reported a notable loss of 13% for its first quarter of the fiscal year 2021, which ended July 31, not all Medtronic's segments performed poorly. The respiratory, gastrointestinal, and renal division performed very well with $720 million in revenue, representing a 5% increase year over year. This was a result of increased demand for respiratory products due to the COVID-19 pandemic. Still, revenue declined in other segments, including cardiac and vascular, restorative therapies, and diabetes. The year-over-year revenue decline was also a result of the pandemic.
Even given these headwinds, Medtronic increased its dividend in the second quarter, bumping it up 7% to $0.58 per share. The company has upped its dividend every year for the past 43 years, making it a Dividend Aristocrat on its way to Dividend King status. Currently, the dividend yield is at 2.2%. For the past 10 years, Medtronic's annual revenue has been increasing sequentially year over year -- except for 2020, again because of the pandemic.
Medtronic also has a strong financial position with ample liquidity. At the end of its first quarter of fiscal 2021, the company had $13 billion in cash and investments. Despite the severe impact the coronavirus pandemic had on its operations, the company's financial position will allow it to navigate such a crisis. This healthcare stock is a definite buy for a long-term investment.
3. Johnson & Johnson
Johnson & Johnson (JNJ -0.10%) is the world's largest healthcare company, striving to help a diverse group of people through medical devices, pharmaceuticals, and consumer products. Despite a few ups and downs, the company has held fast for more than 100 years.
Recently, Johnson & Johnson reported worldwide sales of $18.3 billion, representing a 10.8% decline over the previous quarter. Adjusted earnings per share were $1.67, reflecting a 35.3% decrease. These results show the effects of the COVID-19 pandemic on the company's operations, including its consumer health and medical devices division. Still, not everything was affected -- the pharmaceuticals segment reported a 2.1% increase in sales compared with 2019.
With a 6.3% increase in the quarterly dividend rate -- from $0.95 per share to $1.01 per share -- Johnson & Johnson still holds a strong financial position amid the crisis. As of June 30, the company had $19.1 billion cash on hand and short-term investments, allowing the company to navigate steadily even through unprecedented times. And while it faces several lawsuits over opiates, talcum powder, and other issues, its deep pockets should allow it to persevere.
Investing for the long, long term
When choosing stocks to own for a lifetime, it's important to check the company's financial position and its growth rate. That said, all these stocks are compelling choices for healthcare investors building a long-term portfolio.
