The market has been volatile but generally upbeat so far in 2023, as a combination of hopeful investor sentiment combined with lingering concerns about the state of the global economy weighs on investors' minds. When you're investing in companies on a long-term basis, it's easier to look past these near-term movements and focus on great businesses that can deliver returns if given the time.
Let's take a closer look at two such businesses that have proven they can deliver over time. These are great stocks worthy of consideration in 2023.
1. Johnson & Johnson
Johnson & Johnson (JNJ -2.48%) is one of the world's largest healthcare companies, soon to be split into two separate entities. The company is in the process of spinning off its consumer health business into a new company called Kenvue, while its medical device and pharmaceutical businesses will remain under the umbrella of the Johnson & Johnson name. CEO Joaquin Duato noted in the company's recent 2022 earnings call that "we filed our form S-1 with the SEC, giving us the option to pursue an IPO as a potential step in the separation." The spinoff is expected to be completed by November and both companies will be publicly traded and both plan to pay out dividends.
Johnson & Johnson's consumer health business historically delivers moderate growth compared to its faster-growing pharmaceutical and medical device segments. This makes sense given the maturity of this segment and the profit margins for the products it produces. Still, with brands like Listerine, Tylenol, Motrin, and Benadryl in its consumer health arsenal, it's safe to say that the continued growth in various daily-use product categories can translate to steady ongoing gains for this business over the long term.
Johnson & Johnson recently bolstered its medical device segment with the purchase of Abiomed, a developer of mechanical circulatory support devices that has the distinction of making the world's smallest heart pump. And management expects its pharmaceutical segment to hit $60 billion in revenue by the year 2025, with heavy hitters like its plaque psoriasis drug Tremfya and cancer drugs such as Darzalex and Erleada propelling that top-line forward.
In 2022, the company delivered total sales of $95 billion, up 1.3% from the prior year, with net earnings of $18 billion. Broken down by segment, operational sales in its consumer health, pharmaceutical, and medical device segments increased by respective amounts of 4%, 7%, and 6% in 2022 compared to 2021.
Ongoing macroeconomic challenges, the impact of foreign currency headwinds, and weakened demand for its COVID-19 vaccine compared to the prior year impacted the company's top and bottom lines in the full-year 2022. However, its results were nothing to sneeze at and should also be viewed within the context of the maturity of Johnson & Johnson's business as well as its long-held tendency to deliver more moderately paced growth. Looking back over the past five years, the company has grown both its top and bottom line by about 17% annually.
The sheer size of this company and its dominance across key healthcare markets enabled consistent business and shareholder returns throughout the years. Over the past decade, the healthcare stock delivered a total return of 190% for shareholders, while its dividend -- which the company has raised for 60 consecutive years and counting -- has risen by 90%. Investors looking for a resilient business to buy and hold for the long haul would do well to take a second look at this top stock.
2. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX 0.73%) has built a superb track record of delivering considerable growth on both the top and bottom lines year after year and quarter after quarter. To date, the company's broad success hinged entirely on its dominance of a very lucrative segment of the rare disease drug market.
Vertex Pharmaceuticals currently has four approved products on the market, all of which treat the rare genetic disease cystic fibrosis. These products also belong to a specific class of cystic fibrosis drugs known as CFTR modulators, which are designed to help deal with the underlying cause of the disease.
2022 was a banner year for Vertex Pharmaceuticals. The company reported just shy of $9 billion in revenue for the 12-month period, representing an 18% increase compared to the full-year 2021. Additionally, Vertex reported operating income of $4.3 billion and net income of $3.3 billion, representing respective hikes of 55% and 42% compared to the prior year. And the company closed 2022 with just shy of $11 billion in cash and investments on its balance sheet.
Even with Vertex Pharmaceuticals' substantial market share, it has plenty of room to grow both in and outside of the cystic fibrosis space in the years to come. For one, as these medicines are helping patients enjoy a better quality of life and in many cases live longer, this prolongs the demand for its products. Moreover, the company continues to win approvals for its cystic fibrosis drugs for younger cohorts of patients, expanding its potential addressable market. As many as 88,000 individuals are thought to have cystic fibrosis in North America, Europe, and Australia alone.
On top of the continued promise of its highly successful cystic fibrosis portfolio, Vertex Pharmaceuticals could be on the cusp of launching multiple new drugs in the next couple of years. The company is awaiting regulatory review of its rare blood disorder candidate exa-cel, which it developed with CRISPR Therapeutics to treat severe sickle cell disease and transfusion-dependent beta-thalassemia. The company is also in the process of enrolling participants for its phase 3 study of VX-548, a non-opioid drug candidate for acute pain.
With the only CFTR modulators currently on the market, Vertex Pharmaceuticals has retained a first-mover advantage in the multibillion-dollar cystic fibrosis treatment industry that no other company has come close to penetrating. The company's portfolio of promising drug candidates that would serve underpenetrated and/or fast-growing segments of the rare disease drug market, each of which could represent multibillion-dollar growth opportunities, portend a growth story that, even now, may still be in its very nascent stages. As such, this stock could pose a tempting buy for long-term investors with cash to put to work right now.
