The most successful investors don't limit their thinking to the here and now. They instead look to the future. That long-term mindset can make the difference between meager gains and monumental profits.
We asked three Motley Fool contributors to identify stocks that could make you a fortune over the next 10 years. Here's why they picked Exelixis (EXEL 0.42%), Moderna (MRNA -3.01%), and Vertex Pharmaceuticals (VRTX -1.66%).
A promising biotech with sound fundamentals
David Jagielski (Exelixis): If you're looking to hit a home run with an investment, it's important to look for a balance of a modest valuation and promising growth. You also don't want to take on excessive risk in doing so. One underrated stock that possesses all these features is cancer-fighting company Exelixis, which has a market cap of around $5.4 billion.
The company has a bright future centered around its top-selling drug, Cabometyx (cabozantinib), which treats patients with advanced renal cell carcinoma. The drug generated $302.8 million in sales for the first three months of 2022, up 35% year over year. It also accounted for more than 97% of Exelixis' total product revenue for the quarter. Those numbers could get much bigger as the company has several trials taking place for cabozantinib to treat gastroesophageal cancer, head and neck cancer, and other diseases.
Although Exelixis looks overly dependent on one drug, it does have other trials currently ongoing. It expects phase 1 data to come out in the latter half of 2022 for multiple clinical programs. One of those trials is for XL092, which treats advanced solid tumors. Exelixis is collaborating with Bristol Myers Squibb to determine how well XL092 works with some of the big drugmaker's drugs, including Opdivo, one of its top-selling products.
Profit margins of close to 20% make Exelixis one of the safer biotech stocks you can invest in. That can reduce your overall risk and at the same time give you confidence that the company can fund its future growth without having to resort to dilution and frequent stock offerings.
Shares of Exelixis are down so far this year. However, the stock is beating the major market indexes. And it could be a big winner over the next decade as Exelixis develops its pipeline.
A great long-term play
Prosper Junior Bakiny (Moderna): What do biotech companies need to succeed over long periods? Here are three of the most essential things:
- Products that generate solid revenue
- A solid pipeline with promising candidates
- The funds necessary to advance clinical programs
Based on those criteria, biotech giant Moderna looks like a solid stock to buy and hold through the next decade.
First, the company is still profiting from its coronavirus-related work. Moderna's COVID-19 vaccine is one of the market leaders. It continues to rack up strong sales. Moderna's coronavirus tailwind will likely last well into 2023. If COVID-19 becomes an endemic disease as some experts predict, the company could continue to benefit from this and other COVID-19 products well beyond next year.
Second, Moderna boasts exciting pipeline candidates. The company is looking to strengthen its position in the coronavirus vaccine market with various programs that target specific (highly contagious) variants of the SARS-CoV-2 virus that causes COVID-19. Beyond these programs, Moderna is going after multiple viruses and infectious diseases. The company's targets include the flu, the Zika virus, and HIV, among many others.
Moderna could also acquire promising clinical compounds from other companies. The biotech is generating plenty of cash that could help on this front as well as fund clinical trials and other activities to advance its vaccine platform forward. Moderna ended the first quarter with $19.3 billion in cash, cash equivalents, and investments.
In the next half-decade, the company will likely earn major clinical and regulatory wins and launch new products on the market. While investors are worried about the company's post-coronavirus prospects -- which partly explains its recent struggles on the market -- Moderna has the tools to remain highly successful in the long run.
At current levels, the biotech looks reasonably valued. In my view, Moderna's shares will be worth a lot more than they are today, helping investors become richer along the way.
Huge growth potential
Keith Speights (Vertex Pharmaceuticals): Like my colleagues, I've selected a biotech stock as my pick that could make you a fortune over the next 10 years. Vertex Pharmaceuticals offers huge growth potential.
Currently, cystic fibrosis (CF) is where Vertex makes all of its money. The company enjoys a monopoly in the CF market: Vertex sells all of the approved drugs for treating the underlying cause of the genetic disease. Its CF franchise is on track to generate close to $8.5 billion this year.
CF should continue to be a growth market for Vertex. Even with a monopoly, the big biotech has nearly half of the market left to conquer. However, Vertex's pipeline is the top reason to buy the stock.
Vertex and partner CRISPR Therapeutics expect to file for regulatory approvals of CTX001 later this year in treating rare blood disorders sickle cell disease and beta-thalassemia. CTX001 could become a blockbuster if approved.
Vertex's pipeline features another late-stage candidate with massive sales prospects: VX-147, which targets APOL1-mediated kidney disease. There are around 100,000 patients in the U.S. and Europe with this disease -- an even larger market opportunity than CF.
In addition, Vertex is advancing its acute pain candidate VX-548 into pivotal late-stage testing this year. The company thinks the non-opioid pain drug could be a big moneymaker if approved.
Then there's what I see as Vertex's potential game-changer: its type 1 diabetes program. This program is only in its early stages. However, Vertex believes that it will eventually be able to cure type 1 diabetes.
I won't be surprised if Vertex bolsters its pipeline even more. The company ended the first quarter with a cash stockpile of $8.2 billion. My view is that this stock is poised to deliver tremendous returns over the next decade.