Getting rich by investing in stocks isn't complicated. In fact, it just takes three simple steps.
First, find industries you can expect to grow. Then, buy shares of successful businesses that have strong advantages over their competition.
The third and most important step is to hold your shares long enough to let the advantages you identified deliver market-beating returns. It requires the least effort, but more investors trip over this third step than the first two combined. That's why it's a good idea to stick with stocks you can feel confident about holding for the long run, even if they dip from time to time.
In good times and bad, investors can be sure that steadily rising demand for healthcare will provide a general tailwind for CVS Health (NYSE:CVS), Intuitive Surgical (NASDAQ:ISRG), and Veeva Systems (NYSE:VEEV). Here's why you can expect them to help grow your nest egg into a fortune.
1. CVS Health
You're probably familiar with this company's enormous retail footprint, but that's just one interlocking component of a much larger operation. In 2018, CVS Health acquired Aetna, one of America's largest health benefits management companies.
Before acquiring Aetna, CVS Health was already the country's leading pharmacy benefits manager, a type of business that healthcare plan sponsors hire to negotiate with drug manufacturers as a single entity. In addition to retail pharmacies, CVS also operates 1,100 private health clinics in the U.S.
With a unique combination of related business segments working together, CVS Health can provide quality care at lower costs than its less integrated competitors. The effects are showing up on the company's cash flow statement. Cash flow from operations reached $12.8 billion in 2019. CVS Health thinks this figure rose to between $12.8 billion and $13.3 billion in 2020 despite the pandemic.
2. Intuitive Surgical
There are about 6,000 of this company's da Vinci systems in use around the world by trained surgical teams who performed about 1.2 million minimally invasive procedures last year. That makes it the best known suite of robotic surgical equipment that hospitals have to choose from.
The da Vinci suite of robot-assisted surgical systems is used to assist with a lot of procedures that have been rescheduled by hospitals overwhelmed with the COVID-19 pandemic. Despite the challenges, the number of procedures performed with da Vinci systems in 2020 was about the same as in 2019.
Intuitive Surgical thinks the products it's launched and the procedures it's already cleared to handle could be performed around 6 million times annually. The company is developing da Vinci for new procedures that could increase its annual procedure volume to around 20 million.
With recurring revenue from sales of instruments and accessories that could reach $3 billion this year, investors can count on Intuitive Surgical staying several steps ahead of potential competitors in the space it pioneered.
3. Veeva Systems
This company started out with cloud-based customer relationship management (CRM) services to meet the special needs of pharmaceutical companies. Since its stock market debut in 2013, Veeva Systems has been the leading provider of CRM tools for pharma sales reps who have unique and complex relationships with physicians and government regulators.
In the days before electronic submissions, new drug applications could fill a small office with reams of paper stacked from floor to ceiling. Veeva Systems' operation has expanded far beyond just a CRM service provider, offering a popular suite of tools the life science industry uses to track information generated during drug development.
In addition to simplifying the maintenance of quality control records for pharmaceutical manufacturing sites, Veeva Systems has also begun streamlining the way drugmakers conduct clinical trials with apps that allow physicians and volunteers to participate in clinical trials without necessarily seeing each other in person.
In the third quarter, Veeva systems reported adjusted operating income that rose 39% year over year to $156 million. Investors can look forward to more impressive growth ahead. Veeva Systems' services are also becoming popular in other highly regulated industries. During the current fiscal year, sales to companies that make consumer packaged goods, cosmetics, and chemicals surged to $30 million or about 8% of total revenue.
Easy to keep
Veeva Systems and Intuitive Surgical are both leaders in lucrative healthcare niches that they pioneered themselves. With thousands of retail pharmacies and convenient medical clinics to serve its clients, CVS Health's pharmaceutical and health benefits businesses have a unique opportunity to stay ahead of the competition.
Hanging on through good times and bad is the most crucial step to getting rich as a stock market investor. With strong advantages over the competition that are built to last, holding on to your shares for the long term should be a breeze.