Has the stock market's ups and downs been getting to you? Well, I've got some good news that your stockbroker doesn't want you to hear: Investors who trade less generally outperform investors who are constantly buying and selling their stocks.
When it comes to holding your stocks for the long run, it sure helps to buy businesses that can produce a growing profit. Here are three healthcare companies that created the economic niches that they still dominate. Read on to see why investors can expect them to keep performing for the long run.
Image source: Getty Images.
Align Technology
Align Technology (ALGN 0.40%) markets the leading brand of clear aligners, and business is good. Coronavirus-related lockdowns last year made it hard for potential new customers to see their dentist and get the inside of their mouths mapped out. The COVID-19 pandemic proved that clear aligner brands that require less interaction with dentists aren't a threat to Align Technology's business model.
The company recently reported top-line revenue that more than doubled year over year to a little over $1 billion. This was 13% more than during the previous quarter and the first time the company needed 10 figures to report quarterly revenue.
Placements of Align Technology's proprietary scanner, called iTero, pay for themselves within less than a year for dentists and less than six months for orthodontic practices. With such favorable economics, it's no wonder imaging-system revenues are rising even faster at the moment than sales of the clear aligners themselves.
For long-term investors, the most heartwarming figure in Align's recent financial statements is one that management isn't necessarily proud of. Average selling prices for non-comprehensive products have been stuck in a range between $1,000 and $1,050 for over a year.
Align Technology is already a sustainably profitable company, while its largest competitor, SmileDirectClub, is still posting significant losses, despite recognizing an average aligner sales price above $1,700 for the past year.
Intuitive Surgical
Intuitive Surgical (ISRG -0.41%) is a pioneer of robotic-assisted surgery and is going to be a leader in this space for the foreseeable future. There are other companies manufacturing robot-assisted surgical systems, but they generally aren't interested in competing directly with Intuitive Surgical for specific procedures.
Intuitive Surgical's market position is partly held up by enormous switching costs that hospitals need to consider before training their surgical teams to operate with a competitor's robotic-assisted system. There's also a growing body of real-world evidence supporting the value proposition Intuitive Surgical uses to market its da Vinci brand to hospitals.
A little more than half of Intuitive Surgical's revenue comes from sales of instruments and accessories that need to be replaced with every procedure. Last year's COVID-19-related lockdowns led to an uncharacteristic dip in procedure volume, but demand has bounced back stronger than ever. Procedure volume rose 68% year over year in the second quarter.
Over the past two years, the number of da Vinci procedures performed rose at an impressive annual growth rate of 16.5%. With its lead position well guarded, Intuitive Surgical shareholders can reasonably expect steady gains for many years to come.
Image source: Getty Images.
Veeva Systems
Medical-device manufacturers, big pharmaceutical companies, and biotech start-ups increasingly rely on Veeva Systems' (VEEV 0.17%) suite of cloud services. The steady and high-margin subscription revenue these bolt-on services generate is creating a virtuous cycle that's cementing this company's unique position.
Pharma sales representatives, drug manufacturing facilities, biomedical laboratories, and clinical trials throw out heaps of information that highly regulated businesses need to keep at their fingertips. There are other software vendors out there that address one problem or another that life science businesses run into. None are nearly as complete as Veeva Systems, and its offerings keep growing.
For example, Veeva Systems just acquired Learnaboutgmp, a cloud-based training service provider. At the moment, Learnaboutgmp is focused on keeping life-science industry employees up to speed regarding good manufacturing practices. It's about to help train employees on how to make the most out of Veeva's service offerings, too.
During Veeva's fiscal second quarter, which ended April 30, 2021, subscription revenue rose 26% year over year. Over the same period, cash generated by the company's highly profitable operation soared 70% to $478 million. This is more than enough for Veeva Systems to make acquisitions like Learnaboutgmp that keep clients renewing and upgrading their subscriptions year after year.
Shares of all three of these companies trade at earnings multiples that could make a value investor blush. With a lack of competitive threats to impede their progress, though, it's just a matter of time before they grow into their steep valuations.
