There's a more powerful force than the fear of missing out -- plain old fear itself. The stocks of several small companies developing COVID-19 diagnostics, therapies, and vaccines skyrocketed last year. It's fair to say that most investors remained on the sidelines and didn't buy those stocks. Why? The stocks were simply too risky despite their jaw-dropping gains.
Few investors are eager to take on significant levels of risk, but there are still ways to profit from the rapidly expanding coronavirus market without losing sleep at night. Here are three great COVID-19 stocks to buy if you're not a big risk-taker.
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1. Abbott Labs
Abbott Labs (ABT -0.76%) moved quickly last year to develop COVID-19 tests. The company currently markets eight COVID-19 tests under the U.S. Food and Drug Administration emergency use authorization (EUA) program. In the third quarter of 2020, these tests generated $881 million globally.
The tremendous growth fueled by COVID-19 tests will undoubtedly taper off, especially once the pandemic is over. However, Abbott should maintain a thriving COVID-19 diagnostics business for a long time to come if predictions are correct that COVID-19 will become like the seasonal flu.
More importantly, Abbott has multiple other growth drivers. FreeStyle Libre, the company's wildly popular continuous glucose monitoring (CGM) system, ranks at the top of the list. Abbott's latest version of the CGM device is already available in Europe and could be its biggest winner of all, thanks to its small size and affordable price.
Risk-averse investors will like that Abbott is as solid as they come. It holds the No. 1 position in more than a dozen major markets. It's financially strong with solid earnings growth. The company is a Dividend Aristocrat with 49 consecutive years of dividend increases. Abbott has stood at No. 1 in its industry on Fortune's Most Admired Companies list for seven years in a row. With its sterling reputation, excellent growth prospects, and solid dividend, buying Abbott Labs stock is an easy call.
2. Johnson & Johnson
Investors who aren't big risk-takers will definitely like Warren Buffett's two rules of investing. Rule No. 1? Don't lose money. Rule No. 2? Don't forget rule No. 1. If you're looking for a COVID-19 vaccine stock that will allow you to follow Buffett's rules, you'll probably go with Johnson & Johnson (JNJ -0.74%).
J&J should announce results from a late-stage study of its coronavirus vaccine JNJ-78436735 this month. If those results are positive, the company will automatically have a huge winner on its hands. Unlike other leading COVID-19 vaccines, JNJ-78436735 requires only a single dose.
Because of its diversification across healthcare and its size, Johnson & Johnson's fortunes don't hinge on what happens with its COVID-19 vaccine, though. The company operates three multibillion-dollar business segments focusing on consumer health, medical devices, and pharmaceuticals. When one of these units faces headwinds, the others are usually able to take up the slack.
Like Abbott Labs, Johnson & Johnson is rock-solid. It's the biggest healthcare company in the world. J&J isn't just a Dividend Aristocrat; it's also a Dividend King with an impressive track record of 58 consecutive years of dividend increases. The stock might not deliver the huge gains that smaller biotech stocks could, but you shouldn't have to worry about losing your money over the long term with Johnson & Johnson.
3. Pfizer
No company has played a more significant role in the coronavirus vaccine race so far than Pfizer (PFE -0.21%). The big drugmaker teamed up with German biotech BioNTech early last year. Their COVID-19 vaccine, Comirnaty (BNT162b2), became the first to win EUA in the U.S. It's likely to rake in the most money of all coronavirus vaccines in 2021.
Pfizer could realistically add $7 billion or more in revenue this year from sales of Comirnaty. This one product could boost the company's total sales by at least 14%. Pfizer and BioNTech are also working to develop a flu vaccine based on the same messenger RNA technology used for Comirnaty.
Even without its successful COVID-19 vaccine, though, Pfizer is poised to generate solid growth in 2021 and for years to come. The company has several products with fast-rising sales, including Vyndaqel, which treats a rare type of heart disease called transthyretin-mediated amyloidosis. Pfizer is no longer held back by older drugs that have lost patent protection, such as Lyrica, thanks to spinning off its Upjohn unit and merging it with Mylan to form a new entity, Viatris.
Pfizer is, along with Abbott and J&J, another blue-chip stock that investors can own without concerns of taking on too much risk. It's been in business since 1849 and has adapted to continual changes in the healthcare landscape. Pfizer also offers an attractive dividend that will boost its total return. This big pharma stock could be a market-beater over the next few years with its solid current lineup and promising pipeline.
