If investors thought the coronavirus crash was historic, the bounce-back rally from the March 2020 bottom has been even more impressive. The benchmark S&P 500 took less than 17 months to double from its lows, and it's now gone 10 months without so much as a 5% downside correction. Patience is truly paying off for long-term investors.
But just because the broader market is a stone's throw from a record high doesn't mean investors can't still find bargains. If you've got $1,000 ready to invest, which won't be needed for bill or emergencies, the following five stocks would make for perfect buys for the fourth quarter.
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Novavax
While I'm generally not a fan of chasing the coronavirus stocks after they've catapulted into the stratosphere, clinical-stage biotech stock Novavax (NVAX 4.18%) is the rare exception. It's unlikely to remain a clinical-stage company for much longer and could offer clear advantages that'll help it become a top vaccine player.
The company's coronavirus disease 2019 (COVID-19) vaccine, NVX-CoV2373, led to an 89.7% vaccine efficacy (VE) in a large-scale trial in the U.K. earlier this year, and it produced a nearly identical 90.4% VE in a large-scale trial in the U.S. and Mexico in June. This initial efficacy, coupled with the less-than-stellar uptake from AstraZeneca's and Johnson & Johnson's COVID-19 vaccines, should open the door for Novavax to become the No. 3 player in developed markets.
Also working in Novavax's favor is the mutability of the SARS-CoV-2 virus that causes COVID-19. Novavax's drug-development platform is capable of quickly bringing variant-specific vaccines to trial, if necessary. The company could also benefit from the need for booster shots, depending on how long vaccine-based immunity lasts.
Novavax has an opportunity to beat its peers to market with a combination COVID-19/influenza vaccine, as well. This could be a differentiating vaccine that really allows the company to stand out.
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Exelixis
Biotech stocks are a common theme on this list of perfect stocks to buy for the fourth quarter. Cancer drug developer Exelixis (EXEL 0.41%) offers the right blend of growth and value to make patient investors richer.
The superstar for Exelixis continues to be cancer drug Cabometyx, which derives the bulk of its sales from its first-and-second-line approvals in renal cell carcinoma (RCC) and its approval to treat advanced hepatocellular carcinoma. These indications should help Cabometyx top $1 billion in recurring sales either this year or 2022.
The only reason this company is as inexpensive as it is now -- 21 times forward-year earnings for sustainable mid-teens sales growth -- is the disappointing update from the Cosmic-312 trial. Though the combination of Cabometyx and atezolizumab led to a statistically significant improvement in progression-free survival for previously untreated liver cancer patients, Exelixis notes that it's unlikely to demonstrate a statistically significant improvement in overall survival by trial completion in early 2022.
While this might sound like a disappointment, it isn't. It's par for the course when developing blockbuster cancer drugs. Cabometyx failed in a late-stage study targeted at prostate cancer patients in 2014 but has since bounced back to gain numerous approvals. With this key drug being examined in close to six dozen clinical trials, label expansion opportunities remain abundant for Exelixis.
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Broadcom
Stepping outside the healthcare arena for the moment, semiconductor solutions provider Broadcom (AVGO 3.85%) is a perfect stock to put $1,000 to work in for the fourth quarter. I say "perfect," because Broadcom is at the center of two very sustainable growth trends.
First, it's going to be a multiyear beneficiary of the rollout of 5G wireless infrastructure. A majority of Broadcom's revenue comes from wireless chips and other accessories found in smartphones. Because it's been a decade since consumers and businesses have benefited from an upgrade to wireless download speeds, the expectation is that we'll see a sustainable, multiyear device replacement cycle. This should allow Broadcom to lock in its orders months or years in advance.
But it's not just smartphones that should have investors excited about Broadcom. The pandemic has also accelerated the shift of enterprise and consumer data into the cloud. This means data center demand should be strong for a long time to come. Broadcom is a provider of connectivity and access chips used by enterprise data centers.
The icing on the cake here is that the company has grown its quarterly dividend by more than 5,000% in less than 11 years. Investors can collect a nearly 3% yield as they sit back and watch Broadcom's profitability climb.
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Vertex Pharmaceuticals
Similar to Exelixis, specialty biotech stock Vertex Pharmaceuticals (VRTX 0.34%) offers the right blend of double-digit sales growth and insane value (a forward-year price-to-earnings ratio of only 14), which makes it a no-brainer buy for the fourth quarter.
What allows Vertex to stand out is its overwhelming success in developing multiple generations of treatments for patients with cystic fibrosis (CF). CF is a genetic disease characterized by thick mucus production that can obstruct the pancreas and/or lungs. Vertex's latest treatment, combination therapy Trikafta, was approved five months ahead of the U.S. Food and Drug Administration's review date, and is pacing $5 billion in annual run-rate sales despite hitting pharmacy shelves less than two years ago.
Keeping with the similarities to Exelixis, Vertex was hit hard twice over the past year after two separate experimental treatments targeting alpha-1 antitrypsin deficiency were discontinued in mid-stage trials. Nevertheless, Vertex has more than a half-dozen combined internal and out-licensed treatments in development for a variety of indications. Even though its CF franchise is well-protected from competition, the company is working on an expansive pipeline of products.
And don't overlook Vertex's cash pile. It ended June with about $6.7 billion in cash and cash equivalents, which is more than enough to fuel internal development, fund novel partnerships, or make acquisitions.
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Teladoc Health
Lastly, buying shares of telemedicine kingpin Teladoc Health (TDOC -0.97%) would be a perfect use of $1,000 for the fourth quarter.
When the pandemic hit, there's no sugarcoating that Teladoc was in the right place at the right time. With doctors wanting to keep potentially sick and high-risk people out of their offices, they regularly turned to virtual visit platforms, such as those offered by Teladoc. Last year, Teladoc handled almost 10.6 million visits, which was well over double the 4.14 million visits in 2019.
Some skeptics have cautioned that Teladoc could be a one-hit wonder considering the worst of the pandemic may now be in the rearview mirror. However, this view overlooks the many lasting changes telemedicine brings to the table. It's far more convenient for patients, can allow doctors to keep better tabs on their chronic-care patients, and should result in better patient outcomes and lower total treatment costs for insurers. There's a reason Teladoc's annual sales growth averaged 74% in the six years leading up to the pandemic.
Teladoc Health also acquired the nation's leading applied health signals company, Livongo Health, in the fourth quarter of 2020. Livongo leans on artificial intelligence to send tips to its chronic-care members to help them lead healthier lives. While most of Livongo' 715,000 chronic-care enrollees are diabetics, it aims to offer its services to those with weight management issues and hypertension, as well. In other words, we're watching the very early innings of a personalized care disruptor.
