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2 Growth Stocks to Buy if You're Worried COVID Is Here to Stay

By David Jagielski – Oct 2, 2021 at 8:45AM

Key Points

  • Teladoc and Quidel have been experiencing significant growth amid the pandemic.
  • Teladoc's looking strong as telehealth growth is likely to remain post-pandemic.
  • Quidel's COVID-19 testing dependency makes it volatile but could be a strong hedge if COVID-19 lingers.

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These could be good hedges to help offset the pandemic-related risks.

As COVID-19 cases continue to rise despite high vaccination rates, there's a growing concern that the illness will just be something the world must learn to live with. Pfizer (PFE 0.74%) CEO Albert Bourla doesn't rule out the possibility of requiring annual shots to protect against COVID-19.

If you're worried about that possibility and want to hedge against that, two solid stocks to consider buying today are Teladoc Health (TDOC -3.40%) and Quidel (QDEL).

Patient talking to doctor via tablet.

Image source: Getty Images.

1. Teladoc Health

Teladoc has been experiencing tremendous demand for its services since the start of the pandemic. In 2019, before COVID-19 hit, the company reported 4.1 million virtual visits and revenue of $553 million for the entire year. During the first six months of 2021, the company has already generated more than $822 million in sales and had 6.7 million visits.

Its top line has gotten a boost from the $18.5 billion acquisition of chronic care provider Livongo, which closed in October 2020. Last year Livongo reported $106 million in revenue, this deal will significantly strengthen Teladoc's performance. That merger is still in the early stages and could lead to even more growth over the long term (only 25% of their customers overlapped when the deal was announced last year). Chronic care for illnesses such as diabetes often requires regular interaction with physicians — something telehealth can help with. The Centers for Disease Control and Prevention even recommends telehealth interventions for people with chronic diseases.

If COVID-19 continues to be a burden on the healthcare system, one way to help alleviate that is by shifting some of the workload so doctors are advising their patients virtually rather than in person. And, what's great about the telehealth sector is that it's likely to get bigger whether COVID-19 is around or not. Analysts from Research and Markets expect the industry to grow at a compound annual growth rate of nearly 38% over the next four years.

Telehealth is a cheaper option than in-person visits and can be a way for healthcare companies and employers to keep costs down. Regardless of what happens with COVID-19, it's likely that telehealth is here to stay. Investing in a top provider such as Teladoc is a solid way to gain exposure to the sector. Not only is the company a top provider but its stock has grown 47% over the past three years with the potential to continue that growth. 

2. Quidel

Keeping employees, customers, and the general public safe is crucial for the economy to keep going and to prevent future lockdowns. Healthcare testing company Quidel, which offers multiple COVID-19 diagnostics products, can play an important role in achieving that. Its rapid test, which can produce results in as little as 15 minutes, can provide companies with a quick way to ensure the safety of their staff. Quidel even offers at-home testing kits that are available at retail locations across the country.

The challenge for investors is that COVID-19 testing volumes can play such a large role in the company's financials, and thus have a big impact on the share price. When Quidel reported its second-quarter results for the period ending June 30, revenue was down 12% year over year to $177 million. A big part of the reason: COVID-19 testing product sales declined from $109 million to $83 million. That's in stark contrast to a year ago in Q2 2020 when the company's sales of $202 million were up a staggering 86% from the prior-year period.

In 2020, the stock surged 139% while the S&P 500 rose by a modest 16%. But this year, with investors seeing the COVID-19 testing volumes decline, the stock has fallen 22% while the S&P 500 is still up around 16%. Quidel is a bit of a riskier stock to own simply because it can be difficult to predict. CEO Douglas Bryant said on an earnings call earlier this year that revenue is simply "not forecastable."

COVID-19 testing revenue currently accounts for close to half (47%) of Quidel's revenue. Though the company is seeking ways to diversify its earnings through strengthening testing products for other illnesses, there are still risks. If you're comfortable with that risk and are expecting COVID-19 testing demand to remain high, then this is a stock that can be worth putting in your portfolio. If nothing else, it can be a way to diversify and hedge against COVID-19 and the negative impact it might have on any stocks you own that need a strong economy to do well.

David Jagielski owns shares of Teladoc Health. The Motley Fool owns shares of and recommends Quidel and Teladoc Health. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Teladoc Health Stock Quote
Teladoc Health
TDOC
$27.60 (-3.40%) $0.97
Pfizer Stock Quote
Pfizer
PFE
$49.21 (0.74%) $0.36
Quidel Stock Quote
Quidel
QDEL

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