3 Beaten-Down Stocks to Buy and Hold

What's the best time to buy a stock? When it's trading at a discount. And the best stocks to buy at lower prices are the ones that you can hold for the long term.

With this in mind, we asked three Motley Fool contributors to pick beaten-down stocks to buy and hold. Here's why they chose Abbott Laboratories (ABT -0.03%), Moderna (MRNA -2.45%), and Pfizer (PFE -3.85%).

A Dividend King with a bright future

Keith Speights (Abbott Laboratories): Shares of Abbott Laboratories have fallen close to 30% year to date. But it's not because the company is struggling. Investors appear to be concerned about the economic uncertainty and the anticipated COVID-related sales decline.

Abbott's business continues to perform quite well, though. The company reported 14.3% year-over-year revenue growth in Q2 on a constant-currency basis. Its adjusted diluted earnings per share (EPS) jumped 22.2%. Abbott even raised its full-year EPS guidance. 

To be sure, the company faces some challenges over the near term, including the negative impact of the strong U.S. dollar, healthcare staffing issues, and high inflation. The company also projects a steep decline in revenue from its COVID-19 diagnostic tests in the second half of 2022.

However, Abbott remains one of the best-run companies around. Fortune magazine has ranked it No. 1 among the most admired companies in healthcare for nine consecutive years. Abbott is strong financially. It's a market leader in multiple areas, including continuous glucose monitoring, remote heart-failure monitoring, point-of-care diagnostics, and adult nutrition. 

Abbott is also a Dividend King with a track record of 50 consecutive years of dividend increases. The company has paid a dividend every quarter since 1924. 

The demand for Abbott's wide range of healthcare products should increase over the long term with aging populations across the world. This stock is beaten down now, but could deliver market-beating returns over the next decade and beyond.

The story is just beginning

Prosper Junior Bakiny (Moderna): Moderna's meteoric rise in the early days of the pandemic was impressive, but it arguably wasn't entirely justified. Sure, the company developed one of the leading coronavirus vaccines on the market. But it makes little sense that after launching just one product, Moderna's market cap surpassed that of well-established biotechs with plenty of approved products on the market, and all in just a couple of years. 

That's why the company's horrible performance in the market this year isn't surprising. And with the pandemic slowly receding, Moderna's shares could continue to be southbound in the near term. But it'd be wise for investors to hold on.

Moderna is advancing several exciting programs through the pipeline, including several non-coronavirus candidates in late-stage studies. In June, it kicked off a phase 3 clinical trial for mRNA-1010, a potential influenza vaccine.

Flu vaccines typically aren't very effective. Moderna is looking to change that. The company's other late-stage programs target the respiratory syncytial virus and the cytomegalovirus. There are no approved vaccines for either. 

Thanks to its highly successful coronavirus vaccine, Moderna has the funds to sustain its operations and invest in research and development efforts. The company does not have to resort to dilutive forms of financing. In the next five years, investors can expect Moderna to have multiple data readouts for important candidates, at least one major regulatory approval, and it will start many more late-stage programs.

All of that could help the vaccine maker get back in the good graces of investors. The biotech's revenue might drop next year, but Moderna's mRNA vaccine platform boasts exciting potential. We learned that much from Moderna's success in the coronavirus vaccine market. And that could be the first of many victories for this innovative biotech. 

A growth stock that's a bargain

David Jagielski (Pfizer): A mammoth healthcare company with a market cap of nearly $240 billion, trading at just eight times its earnings and paying a yield of 3.8%, isn't a deal that you might expect investors to be overlooking right now. But that's what is happening in Pfizer's case. The healthcare stock has been in free fall this year, down 28% since the start of the year. While the stock market is struggling, that's still a steeper drop than the S&P 500's decline of 24% over the same time frame.

What's behind this puzzling performance? Some investors are afraid that Pfizer's top line will tumble next year when sales from its COVID-19 vaccine and pill could decline sharply. But even if that's the case, the pharmaceutical company still has catalysts that can generate growth for its business in the long run. Next year may be a transitional one for the company. However, Pfizer has been preparing itself by taking on multiple acquisitions within the past year to strengthen its operations.

Its most recent deal was the acquisition of Global Blood Therapeutics, which it closed earlier this month. Global Blood, which focuses on developing treatments for sickle cell disease (SCD), generated $235 million in revenue over its past four quarters. Pfizer says the business will help its pipeline develop more SCD treatments. In June, Pfizer also acquired ReViral, which could help it in its development vaccines for the respiratory syncytial virus.

Not all of the moves Pfizer is making will lead to significant revenue next year and make up for what could be a huge loss in COVID-related sales. But over the long term, these and other acquisitions should pay off.

Pfizer is a business with a strong track record for growth over the years. It has over $33 billion on its books in cash and short-term investments that can help it pursue even more growth opportunities. And it's not as if the company's pipeline, which contains more than 100 projects, is short of options.

For long-term investors who crave a great dividend, Pfizer could be an underrated stock to buy right now.