Savvy investors understand that stock markets are volatile and nothing to be scared about. Market sell-offs are an excellent opportunity to buy good stocks at beaten-down prices.
Companies with solid underlying businesses have tremendous growth possibilities and are capable of weathering momentary storms. In other words, they are worth investing in regardless of market conditions.
Here's a rundown of three such companies that should help you build a more robust portfolio over the long run.
1. Intuitive Surgical
Intuitive Surgical (ISRG 2.17%) dominates the rapidly growing robotic surgery market with its da Vinci robotic systems.
When it comes to investing, healthcare is usually considered a defensive sector. In other words, stock investors typically rely on such sectors for stable returns -- both dividend and capital returns. Qualitatively, businesses in defensive sectors deal in products and services that are constantly in demand, regardless of the state of the economy.
In Intuitive's case, however, its systems are used for minimally invasive procedures that are usually elective. Unfortunately, the COVID-19 pandemic pushed demand down for all nonessential procedures, limiting the company's short-term growth and pressuring its stock price. However, the future remains bright for Intuitive.
Da Vinci procedures performed worldwide grew approximately 14% in its fiscal second quarter versus the year-ago quarter. The company also earns from selling disposable instruments and accessories used during these surgeries, which adds to its top line.
Intuitive holds a competitive advantage over its peers with its wildly popular state-of-the-art systems. The company grew its installed base of da Vinci surgical systems globally by 13% over the previous four quarters to 7,135 systems and has trained more than 55,000 surgeons to use them.
The global robotic market could grow at a compound annual rate of 21%, valuing it at around $7 billion in 2026. Intuitive already dominates this market with a 70% market share, according to BIS Research.
Peers Medtronic and Johnson & Johnson have also entered the market, but it could be years before they can challenge Intuitive's market position. Hospitals spend a lot of money on these systems and training surgeons to use them. It is unlikely they would switch over to any competitor's products in the near term, thus keeping Intuitive's revenue safe in the near future.
2. HCA Healthcare
HCA Healthcare (HCA 2.56%) operates close to 184 hospitals and around 2,200 other healthcare facilities. Although healthcare stocks are safe-haven investments, HCA Healthcare struggled amid the pandemic. Elective procedures were pushed back, which reduced hospital admissions.
However, now that COVID-19 infection levels are lower and hospital admissions are returning to normal, this stock could skyrocket. Over the last five years, except during the height of the pandemic, the company has kept its revenue, operating margin, and free cash flow (FCF) relatively steady. Free cash flow determines how much cash the company generates after all expenses, including capital expenditures, are taken care of. FCF also funds dividends. The pandemic dragged these numbers down but have started to pick up again, as seen in the chart below.
Data by YCharts.
An added perk is HCA also pays a dividend with a yield of 1.02%. Although it's lower than the S&P 500's average of 1.6%, investors can access regular income by holding the stock. The healthcare sector will continue expanding, which is why this attractively valued stock is a perfect choice for long-term investors.
3. Trulieve Cannabis
Although the market seems to have lost trust in marijuana stocks, the global cannabis business is expanding exponentially. New estimates show that the market could grow at a compound annual rate of 20% to be worth $149 billion by 2031.
Trulieve Cannabis (TCNNF 1.79%) began as a small medical cannabis business in Florida and has grown to run 175 dispensaries throughout 11 states. With 122 dispensaries in Florida, it dominates its local market. Having such a grip would benefit the company when recreational cannabis is legalized in the state. Its rapid expansion is most likely responsible for its operational profits remaining stable for 18 straight quarters. This augurs well for Trulieve's future road to GAAP profitability.
In its recent second quarter, adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) came in at $111 million, a 17% surge from the prior-year period. A revenue surge of 49% year over year to $320 million boosted this performance.
Trulieve's stock is now trading at its cheapest since it started trading on the OTC markets, and is now trading at just two times trailing 12-month sales. The industry is still nascent, which means long-term investors now have an opportunity to buy growth companies like Trulieve at a discounted price.
Looking at the prospects for the long haul
Temporary headwinds in the current macroeconomic environment are pressuring the share price of these companies. But Intuitive Surgical, HCA Healthcare, and Trulieve Cannabis have grown their businesses significantly over the last five years while their long-term future continues to look promising. With all three stocks trading below their 52-week highs, this price dip is definitely an opportunity for long-term investors.
