Some investing decisions require a lengthy period of analysis, but not all of them do. There are some stocks that stand out as easy choices.
This stock is just getting started
Prosper Junior Bakiny (Eli Lilly): Winners keep winning. There aren't many big-name companies in the pharmaceutical industry that have been bigger winners than Eli Lilly in the past year. The company's shares have risen by close to 40% in the trailing-12-month period, which comfortably puts the performances of the healthcare sector and S&P 500 to shame.
But that's just the beginning, as Eli Lilly's business is made of pretty stern stuff. We can mention the drugmaker's strong position in the diabetes drug market as evidence. For instance, Eli Lilly dominates the insulin market, along with Sanofi and Novo Nordisk. Lilly continues to innovate, too. One of its most recent approvals was for Mounjaro, a highly promising therapy for type 2 diabetes (T2D).
The company is developing basal insulin-Fc (BIF), a once-weekly insulin product for T2D patients, which could also become highly successful. Diabetes will likely become a bigger problem in the coming years as the population ages. Lilly has demonstrated its ability to develop novel therapies for this patient population.
The drugmaker also has a raft of medicine and pipeline programs in other therapeutic areas. Sales for cancer drugs Verzenio, migraine therapy Emgality, and immunosuppressant Taltz continue to grow robustly. Lilly is running dozens of clinical trials, including some in the field of immunology and a potential Alzheimer's disease medicine called donanemab.
In short, the future is bright for Eli Lilly because it has many of the main ingredients a pharma giant needs to succeed in the long run. That includes a lineup of solid medicines (many of which generate over $1 billion in annual sales), a valuable pipeline to handle patent cliffs, and strong profits and cash flow to keep pouring into research and development.
That's why this winner will keep on winning. And that's why it's an excellent stock to buy today.
A great pick for both dividend and growth-oriented investors
David Jagielski (Pfizer): If there's one healthcare stock I'd tell someone to buy right now, it's Pfizer. For dividend investors, Pfizer pays an above-average yield of 3.1% (versus the S&P 500 average of 1.7%). The company has also been increasing its quarterly dividend every year since 2010. Its payout ratio remains modest at around 36%, leaving plenty of room for more dividend hikes in the future.
Meanwhile, for growth investors, the company is building up its pipeline for more revenue growth down the road. Much of Pfizer's COVID-19 revenue may not be around in a few years, but that doesn't mean that the company won't still be reaping the rewards from it due to all the extra cash flow it's been generating over the past few years.
Pfizer has acquired Trillium Therapeutics, ReViral, and Arena Pharmaceuticals in just the past 12 months. It also has a pending deal to acquire Biohaven Pharmaceuticals, which is expected to close next year.
The big drugmaker is bolstering its pipeline through these acquisitions in preparation for the inevitable drop-off in COVID-19 vaccine sales. It will likely have a big gap to fill. Sales from its COVID-19 vaccine and pill should total around $54 billion this year, slightly more than half of total revenue.
But with 29 phase 3 trials currently ongoing and another 61 in phase 1 and 2 combined, Pfizer has plenty of products that could help make up for a drop in sales down the road. That should lessen the overall blow. Plus, Pfizer's combined cash and short-term investment balance of $23.9 billion can also go a long way in funding more acquisitions to help expand that pipeline.
Pfizer stock is much less expensive than the overall healthcare sector, with shares trading at less than eight times expected earnings. While some discount is warranted given the uncertainty ahead, Pfizer's stock looks to be significantly undervalued right now.
A big biotech on a roll
Keith Speights (Vertex Pharmaceuticals): I think that Vertex is hands-down the best biotech stock on the market right now. And that's not just because the stock has soared more than 30% so far this year.
Vertex remains a juggernaut in the cystic fibrosis (CF) market. It developed the only approved drugs that treat the underlying cause of the rare genetic disease. No potential rival has advanced a product beyond phase 2 testing yet.
I'm also highly optimistic about Vertex's pipeline. The biotech and its partner, CRISPR Therapeutics, expect to file for regulatory approvals of gene-editing therapy exa-cel later this year for treating beta-thalassemia and sickle cell disease. Exa-cel holds the potential to be a blockbuster cure for these rare blood disorders.
Vertex has a promising late-stage candidate targeting APOL1-mediated kidney disease. This market could be even bigger than CF for the company. It's also advancing a non-opioid pain drug into pivotal phase 3 testing this year.
In addition to these programs, Vertex could have a game changer for patients with type 1 diabetes (T1D) on the way. It has already achieved early success with VX-880 in phase 1 testing.
Vertex's price-to-earnings-to-growth (PEG) ratio is only 0.42. With the company's low valuation and exceptional growth prospects, its stock truly looks like a no-brainer pick right now.