Trying to time stock market movements is a surefire way to underperform, but many of the world's most successful investors spend a lot of time preparing for the next market crash. That's because a broad-based panic can pull the rug out from under great stocks just as quickly as the lousy ones.
Do you have your list of stocks to buy during the next market crash up to date? If you've got room for more, Align Technology (NASDAQ:ALGN), CVS Health (NYSE:CVS), and Intuitive Surgical (NASDAQ:ISRG) are three unstoppable healthcare companies to keep in mind the next time timid investors start liquidating their portfolios in a panic.
1. Align Technology: Easy to keep smiling
Back in March, shares of Align Technology were hit hard because investors assumed pandemic-driven pressure to generally avoid face-to-face visits would squeeze Align's share of the market for clear aligners. Instead of flowing toward competing services that can be completed entirely online, such as SmileDirectClub, customers shopping for teeth alignment services were willing to wait. Align Technology reported revenue that soared 20.9% year over year to a record high of $734.1 million in the third quarter.
Gross margins that rose sequentially and year over year suggest the company hasn't had to resort to cost-cutting to compete. In fact, the COVID-19 pandemic has been driving demand for clear aligners higher because people still working from home have a lot of extra income they haven't been spending on traveling and entertainment. Millions of Americans have also been noticing for the first time exactly what they look like when speaking to colleagues during Zoom meetings they otherwise would never have attended.
Clear aligners aren't the only item Align Technology has been selling more of these days. Sales of the company's imaging systems dipped in the second quarter but bounced right back in the third by rising 110% sequentially and 24% year over year to $113.4 million. That means it's getting easier and easier for potential new customers to find a dentist office that can quickly scan the inside of their mouths and get them started with a set of clear aligners from Align Technology.
We don't know what challenges will land in front of Align Technology in the future, but its huge web of imaging-service providers is an advantage over the competition.
2. CVS Health: Well-positioned
The resilience this company's shown during the coronavirus pandemic is one sign of many that this is a stock to buy and hold for the long haul, and you don't need to wait for a market crash to scoop up shares at a good price. CVS Health stock has been trading at just 8.8 times the company's earnings forecast for 2020. While it's hard for a company this size to grow by leaps and bounds, CVS Health's unique position in the center of America's shifting healthcare system will allow the company to deliver growing profits to its shareholders through good economic times and bad.
The COVID-19 pandemic has decreased customer traffic into retail pharmacies but front-of-store revenues still rose 2.7% year over year in the third quarter. The retail pharmacies that come to mind when investors think about CVS Health are an important component of the company's overall business, but sales from people running in to pick up something that isn't medicine is responsible for a tiny portion of total revenue
The pandemic hasn't been the only challenge CVS Health has overcome this year. Revenue from the company's pharmacy-services segment dipped year over year due to the loss of a client that won't be missed very much. Operating income from the pharmacy-services segment rose 17% year over year from total pharmacy-service claims that rose about 4% year over year.
The company's healthcare-benefits segment has been held back by the planned divestiture of some Medicare plans, plus huge COVID-19-related expenses. Despite the temporary challenges, adjusted operating income from the segment during the first nine months of 2020 surged 36% year over year to $6 billion.
CVS Health raised guidance for cash flow from operations to a range between $12.75 billion and $13.25 billion in 2020, which puts it on track to reach its post-Aetna merger deleveraging target in 2022. The company's used just 23% of free cash flow generated by operations over the past year to meet its existing dividend obligation, which means there'll be plenty of room to make big payout bumps in 2022 and beyond. Don't be surprised if the 2.9% yield the stock offers now reaches a double-digit percentage by 2025.
3. Intuitive Surgical: Robotic recovery
Minimally invasive surgical procedures are increasingly common, and this pioneer of robot-assisted surgical systems is driving the trend. In 2020, it's nearly impossible to find a big hospital that doesn't boast at least one of Intuitive Surgical's da Vinci Surgical Systems and teams of professionals trained to use them.
A lot of hysterectomies, hernia repair procedures, and other sources of instrument and accessory sales were put on hold during the second quarter, but the company's making a recovery. Third-quarter revenue from instruments and other accessories that need to be replaced after each procedure rose 37% sequentially and 4% year over year.
Intuitive Surgical investors are used to seeing instrument and accessory sales rise year over year by double-digit percentages. There's a good chance that coronavirus vaccines will begin loosening up hospital restrictions by the end of 2020, allowing Intuitive Surgical's sales force to resume business as usual in 2021.
Sit back and relax a little easier
You never can tell what's going to cause the next stock market crash, but looking for bargains can help you watch whatever catastrophes unfold with a little less anxiety. Just don't forget to add this list of unstoppable healthcare stocks to your rainy-day shopping list.