Last month's slump was a reminder of how quickly the market can go from a rally to a pullback. In this case, the situation is looking bright. The S&P 500 has rebounded more than 7% since its September low, nearly recovering those losses. It's impossible to predict whether the market will head higher or crash in the months to come. But we do know one thing: Long-term investors will surely face future market crashes. That's why it's never too early to prepare.
To me, the best way to insulate a portfolio is with shares I consider "safe." These are companies that have proven their resilience after a crash, and at the same time they offer strong products/services and growth prospects. Sounds like a lot to ask? Well, these three healthcare names prove it's possible to deliver the whole package.
Image source: Getty Images.
Abiomed
Annual revenue at Abiomed (ABMD), a maker of circulatory support devices, has been climbing for more than a decade. During this time, the U.S. Food and Drug Administration (FDA) cleared its collection of Impella heart pumps -- the world's smallest -- for elective and urgent procedures including stenting and balloon angioplasty.
Impella devices assist pumping during a procedure or during situations -- such as cardiogenic shock -- when the heart is unable to pump enough blood to organs. More recently, the FDA granted the Impella two emergency use authorizations (EUA) for the treatment of COVID-19 patients with heart and lung complications.
The coronavirus outbreak caused the postponement or cancellation of many elective procedures, which hurt Abiomed. Worldwide Impella revenue fell 22% in the most recent quarter. But the company said stenting procedures using Impella since have resumed in most locations. In addition to this rebound in traditional business, the COVID-19 EUAs offer Abiomed another revenue stream, this one likely to grow with any potential increase in serious coronavirus cases.
Abiomed has shown its strength following a crisis. The shares have rebounded 90% since the March market crash and are up 60% for the year.
Teladoc
Several months ago, Teladoc (TDOC -2.91%) was already an interesting opportunity. Then it announced a merger with fellow stock-market superstar Livongo Health, and things started looking even brighter. Teladoc is a telemedicine giant, with more than 51 million members worldwide. Through the platform, patients book virtual medical appointments with a general practitioner or with a doctor practicing one of 450 subspecialties. Livongo, meanwhile, offers digital management tools for chronic illnesses such as diabetes and hypertension.
Teladoc and Livongo together expect to post 2020 pro forma revenue of $1.3 billion. Alone, Teladoc reported $553.3 million in revenue last year. The combined companies also expect to report pro forma adjusted EBITDA of more than $120 million this year. Teladoc announced adjusted EBITDA of $31.8 million in 2019. This means the financial advantages of the transaction are right around the corner.
Teladoc didn't see a slowdown during the coronavirus health crisis. In fact, the crisis accelerated growth, with second-quarter revenue soaring 85% as people opted to connect with doctors online in an effort to avoid crowds (and vice versa -- some doctors' offices temporarily closed as well, leaving fewer opportunities for in-person appointments). As the health crisis eases, Teladoc may not see the same demand it did at the height of the crisis. That said, solid growth is likely to continue. The global telemedicine market, at a 15% compound annual growth rate, is forecast to reach more than $155 billion by 2027, a report by Grand View Research shows.
Teladoc shares have gained 84% since their lowest point in March. Wall Street expects the stock to climb about 10% within the coming 12 months. And I think it could move higher over the longer term, considering the outlook for the telemedicine market and Teladoc's strength today.
Exelixis
Exelixis (EXEL -0.76%) is making a big bet on one molecule: cabozantinib. The molecule blocks the activity of tyrosine kinases, which are involved in cancer cell growth. This biotech company has launched more than 70 clinical trials for cabozantinib in indications including melanoma and breast cancer. Nine are in phase 3 trials.
But cabozantinib isn't only in the investigational stage. The therapeutic is already approved for advanced renal cell carcinoma (RCC) and hepatocellular carcinoma. And that's helped annual revenue climb over the past five years. Exelixis's global cabozantinib business generated annual revenue of more than $1 billion for the first time last year. Partner Ipsen (IPSEY -1.24%) markets the product outside of the U.S.
Possibilities for more revenue growth are on the horizon. In late August, Exelixis submitted cabozantinib to the FDA for a new potential indication. The regulatory agency will consider it as a combination treatment with Bristol Myers Squibb's (BMY -8.51%) Opdivo in patients with advanced RCC. The two companies reported results of a pivotal trial earlier this year, saying the drug combination met primary and secondary endpoints.
Exelixis shares have gained 36% so far this year. If the stock reaches Wall Street's average 12-month price target of $31.46, it will have doubled from its March low. If additional late-stage trial candidates make it to market, it's easy to see this stock posting further gains over time.
