When you're looking for stocks to buy, sticking to businesses that don't have much to fear from their competitors is the way to go. In the highly regulated healthcare sector, there are more than a few companies that are miles ahead of their nearest competitors.
These three stocks have already produced big gains for their long term shareholders and there's still plenty of fuel in the tank to drive them much higher.
| Company (Symbol) | Industry | Market Cap |
|---|---|---|
| Veeva Systems (VEEV -1.67%) | Cloud-based services | $49 billion |
| Align Technology (ALGN -3.55%) | Medical devices | $55 billion |
| Doximity (DOCS -2.09%) | Social media | $15 billion |
Data source: Yahoo! Finance.
Here's why buying these stocks now could do wonders for your portfolio over the long run.
Veeva Systems
This company provides drugmakers and other businesses in highly regulated industries with cloud-based services. Veeva Systems began with customer relationship management (CRM) software from Salesforce.com (CRM -1.79%) but didn't stop there.
Veeva Systems has grown into an unstoppable business by continually adding to its list of services. For example, Veeva Vault helps drugmakers keep track of the piles of data thrown off by clinical trials. There's also a suite of quality control applications companies end up wanting if those clinical trials succeed.
Image source: Getty Images.
There's no shortage of start-up cloud service providers that focus on different aspects of the highly specialized biopharmaceutical industry. None have as many bases covered as Veeva Systems, making it the last cloud service provider that any drugmaker would consider dropping entirely.
During the company's fiscal first quarter, which ended on April 30, Veeva Systems reported total revenue that soared 29% to $434 million. As a subscription-based business with relatively low overhead, operating income is outpacing topline revenue. With plenty of resources to work with, Veeva can stay several steps ahead of the competition for the foreseeable future.
Align Technology
This is the company behind the Invisalign brand of clear aligners. This is an increasingly popular method of tooth alignment that has mostly replaced metal mouth braces. It's also inspiring millions of adults to invest in their smiles.
Align Technology partners with dentists and orthodontists who add their own markup on top of the selling price that Align Technology recognizes. Years ago, it looked as if SmileDirectClub (SDC 23.08%) was going to eat Align Technology's lunch with a direct-to-consumer model that involved much less interaction with dentists.
People interested in tooth alignment tend to see their dentists regularly. An ability to add a beefy mark up on top of Align Technology's low prices gives those dentists incentive to promote Invisalign on their own dime.
Align Technology makes so many aligners that its average sale price per case is only $1,040 for dentistry-light applications and just $1,250 for more challenging alignment issues. That's a lot less than SmileDirectClub's average sale price of $1,885 per case.
ALGN Revenue (TTM) data by YCharts
Despite receiving far less revenue per case, Align Technology can boast strong profits while its competition can't even make ends meet. With proprietary mouth scanners already placed in thousands of dentist offices throughout the U.S. Align's advantage over the competition should continue growing.
Doximity
This company operates a social media application built exclusively for medical professionals. Doximity is more than just a way for doctors, physician assistants and pharmacists to keep in touch with each other. For example, the app allows physicians to easily call patients' smartphones from their personal devices without running afoul of privacy laws or asking patients to install anything.
Image source: Getty Images.
Doximity raised a whopping $548 million in a public offering this June, but it won't need to lean on its cash cushion for growth. Its digital platform already generates heaps of high margin revenue through advertisements and subscription services. Those services are so popular the company has an outstanding 167% net revenue retention rate over the past year.
Doximity expects revenue to climb more than 40% to reach nearly $300 million this year. With an asset-light operation, management expects a lot more revenue to reach the bottom line than you would expect for a company that completed its IPO just a couple of months ago. Adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA are expected to land somewhere between $106 million and $109 million this year.
There aren't any guarantees that another social networking app geared toward medical professionals won't come along to challenge Doximity. With such a big head start, though, it doesn't seem likely.
