If you've been investing long enough, you may have heard that historically September is not a great month for stock market returns. While there's some data to back this up, I prefer to think of September as a buying opportunity.
In that spirit, I'm turning my attention to three healthcare stocks I think are strong buys for September and beyond. After recent earnings results, each has given me renewed faith in their long-term potential.
Potential beyond COVID-19
Moderna (MRNA -0.58%) has become a household name due to its successful coronavirus vaccine. Because of its rise in name recognition, it's easy to forget that this vaccine is Moderna's only commercially available product. The long-term investing thesis needs to be based on the application of the mRNA technology in other areas, but some revenue from the COVID-19 vaccine can be expected for the near term.
As of early August, when the company reported its second-quarter 2022 earnings, Moderna had 46 programs in development. Many of these are variations on the COVID vaccine, but others target new viruses and diseases. Of most interest to investors are the four programs currently in phase 3 trials. These are vaccines that are closest to being commercially available, pending the successful completion of the trials.
One of these four is a COVID booster that is being tailored to more recently emergent variants. A second is a seasonal flu vaccine. These two have the most potential for widespread adoption and future revenue.
The two other vaccines in phase 3 trials are for respiratory syncytial virus (RSV), a common respiratory virus, and cytomegalovirus (CMV), a leading cause of birth defects in the U.S. Moderna believes there are approximately 1 million people who could be vaccinated for RSV. As for CMV, Moderna states that "congenital CMV is the leading infectious cause of birth defects in the U.S., and yet 91% of women have never heard of it."
The good news for Moderna's future is that revenue from the COVID vaccine has helped the company build a massive cash position; it ended Q2 with $18 billion on its balance sheet. This will help Moderna invest in future programs as well as bridge the gap between the slowing COVID revenue and future product revenue streams.
Growing into an expanding market
Investing in the healthcare space, specifically in biotechs, can be risky. One way to gain exposure to this sector while minimizing some of that risk is by owning the companies that provide the equipment and consumables that other companies use to develop their products. That's exactly where Repligen (RGEN 0.05%) shines.
Repligen estimates its total addressable market to be more than $8 billion. In 2021, the company had approximately 8% market share, demonstrating the massive opportunity in front of the business.
Given recent results, there's reason to believe Repligen can continue to take market share. In the most recently reported quarter (Q2 of 2022), Repligen grew revenue 27% year over year, -- and that comes on top of 86% growth in Q2 of 2021. The company also increased its earnings per share by 38% and generated $20 million in free cash flow.
RGEN Revenue (TTM) data by YCharts
Management also raised guidance for 2022 and is now expecting revenue growth of 18% to 21% and net income in the range of $152 million to $156 million. This tells me that the company is confident about its positioning and growth.
Should investors buy both of these companies now?
Taken together, Moderna and Repligen offer the best of both worlds for healthcare investors. In Moderna, you get a company with a strong balance sheet that is poised for continued success with a new kind of vaccine. On the other hand, Repligen provides strong, steady growth in a vital niche of the sector, with a large market opportunity ahead of it.
Adding both of these to a portfolio makes a ton of sense, and with both companies' share prices off sharply -- Repligen by 35% and Moderna by 71% -- each can be purchased at a discount.
