The S&P 500 slipped 1.1% in January to finish the first month of the year in the doldrums. And the coronavirus pandemic seems far from over. But these two elements shouldn't discourage us from investing in stocks that have proven themselves over the long term -- and fared well through the health crisis.
As long-term investors, we look at the big picture. And that means revenue now, and potential for future revenue and earnings growth. So, if you have $10,000 to invest now, these points are important to consider before pressing the "buy" button. Here, I've chosen two healthcare stocks and two consumer stocks that should reward investors over the years to come.
Image source: Getty Images.
Abiomed
Abiomed's (ABMD) heart pumps assist or take over the pumping function to allow the heart to rest. They're approved for cardiogenic shock -- when the heart can't pump enough blood -- and are used as part of cardiac procedures such as open-heart surgery. The U.S. Food and Drug Administration (FDA) has even granted Emergency Use Authorization (EUA) for their use on COVID-19 patients.
I like the fact that Abiomed holds more than 1,000 patents and has another 850 pending. Intellectual property strength will help assure its spot in this growing market over time. The ventricular assist device market, at a compound annual growth rate of 20%, may reach $3.5 billion by 2027, according to a Global Industry Analysts report.
Abiomed's revenue and general financial health are another plus. The company's revenue in the quarter ending Dec. 31, 2020 rose 5% to a record $232 million year over year. Abiomed said it has more than $787 million in cash and equivalents and no debt.
Abbott
You might not think "coronavirus stock" when you first see Abbott Laboratories (ABT -1.35%). The company essentially operates four businesses -- medical device, nutrition, diagnostics, and pharmaceuticals. But Abbott has emerged as a leader in coronavirus testing. The FDA has granted EUAs to eight of the company's tests.
In 2019, Abbott's medical device sales surpassed those of diagnostics by about $5 billion. This past year though, device sales registered a slight 3.7% drop while diagnostics sales jumped a solid 40% thereby reducing the gap to about $1 billion, thanks to postponed medical procedures, but increased coronavirus testing.
In the most recent quarter (ending Dec. 31, 2020), Abbott's sales rose more than 28% to $10.7 billion year over year. That includes $2.4 billion of coronavirus diagnostics sales. Abbott predicts full-year 2021 earnings per share will increase more than 35% year over year.
In the near term, I expect Abbott to benefit as medical procedures resume and governments require more and more coronavirus testing. And Abbott's strengths in medical devices and diagnostics should support long-term earnings growth as well.
Lululemon
Many apparel retailers suffered in the early stages of the health crisis. Stores closed temporarily, and consumers focused on essentials rather than discretionary items. But shoppers continued buying lululemon athletica's (LULU 1.66%) yoga-inspired clothing as they spent more time at home.
In the quarter ended Nov. 1, 2020, lululemon's revenue climbed 22% to $1.1 billion year over year. Gross profit rose 24% to more than $627 million. And earnings per share totaled $1.10 versus $0.96 in the year-earlier period. Most recently, lululemon said it expects revenue and earnings for the quarter ending Jan. 31 to be at the high end of its forecast range.
And more growth is on the horizon. Lululemon is sticking to its "Power of Three" plan. As part of it, the company expects to more than double sales in its men's line by 2023. The retailer also wants to quadruple international revenue by that time. And finally, when it announced the plan in 2019, lululemon spoke of more than doubling digital revenue by 2023. The coronavirus outbreak has accelerated that growth. For example, digital revenue rose 93% in the most recent quarter.
Etsy
Shoppers flocked to Etsy (ETSY -0.33%) last year for handmade masks -- but those weren't the only popular items on the online marketplace for creative goods. Gross merchandise sales excluding mask sales soared 93% to $2.2 billion year over year for the quarter ending Sept. 30, 2020. So even if shoppers stop buying masks on Etsy, the platform won't suffer. Esty has been profitable for the past three years, and annual revenue has been climbing since the company went public in 2015.
Data source: YCharts.
I expect Etsy to benefit from the shift to online shopping. Digital already was gaining ground prior to the coronavirus outbreak. But the crisis accelerated the movement. A McKinsey & Co. report shows consumers are likely to continue to shop more online even once the pandemic is over.
While Amazon (AMZN 4.55%) remains a major rival for many online retailers, it's less of an issue for Etsy. Buyers turn to Etsy for its vast selection of handcrafted goods and creative gifts. And Amazon isn't strong in this area. So, Etsy can really take off over the long term.
Abiomed, Abbott, lululemon, and Etsy all gained last year, rebounding from the March market crash.
Data source: YCharts.
But I don't think share price performance will stop there. Investors who buy the shares now -- with $10,000 or even a smaller investment -- and patiently hold on should benefit from revenue and earnings growth in the years to come.
