3 Healthcare Stocks to Buy and Hold for the Next 10 Years

The healthcare industry has long proven itself to be a resilient place for investors to park their cash. If you're looking for tried-and-true companies that have a robust track record of enriching shareholders and delivering favorable financials in a wide range of environments, you don't have to look far.

Here are three such stocks to consider adding to your buy basket this month, each of which you can hold for the long haul.

1. Vertex Pharmaceuticals

Vertex Pharmaceuticals (VRTX 0.43%) has continued to report explosive financial growth from its core portfolio of products, all while expanding its pipeline into new disease areas ripe for disruption. And the healthcare stock has enriched investors in the process. It's delivered a total return of 24% over the past year, compared to the S&P 500's negative return of 7% in that same period.

The company recently released its financial results for 2022. During the 12-month period, Vertex Pharmaceuticals generated revenue of $9 billion, net income of $3.3 billion, and operating income of $4.3 billion. These figures increased 18%, 42%, and 55%, respectively, from 2021. Vertex also closed out the period with cash and investments on its balance sheet to the tune of $11 billion.

The company's resilience against a difficult economic backdrop goes back to the demand for its products; they all not only treat cystic fibrosis, but also are the only approved therapeutics designed to target the root cause of the genetic illness. This class of drugs is known as CFTR (cystic fibrosis transmembrane conductance regulator) modulators. Bear in mind that the cystic fibrosis therapeutics market is on track to be worth an estimated $32 billion by the year 2027.

Despite Vertex's considerable footprint in this field, management estimates that there are as many as 20,000 individuals who could take its existing portfolio of drugs but are not doing so, while there are another 5,000 cystic fibrosis patients who need treatment but can't take CFTR modulators.

Vertex Pharmaceuticals is already working on a new drug for the latter cystic fibrosis population with Moderna; it also has a budding pipeline that includes candidates targeting type 1 diabetes, sickle cell disease, acute pain, and APOL1-mediated kidney disease. Vertex's pipeline could see numerous approvals coming down the pike in the next five years, and one approval as soon as this year. This potential, combined with its robust portfolio of top-selling cystic fibrosis medicines that continue to drive strong revenue growth and profitability, make a compelling argument for a long-term buy-and-hold position in this top healthcare stock.

2. Johnson & Johnson

Johnson & Johnson (JNJ -0.31%) has generally been known for more steady and moderate returns, but even so, investors who have stayed with the stock through at least the last five years are looking at a total return of about 40%. A more compelling draw for this stock is its dividend, which currently yields 2.8% and which Johnson & Johnson has raised every year for 60 years and counting.

When the company spins off its consumer health division as Kenvue later this year. Shareholders of the current company will remain invested in both Kenvue (the new consumer-health business) and Johnson & Johnson (the combined pharmaceutical and medical-devices business) at the time of the split, and receive dividends from each.

The consumer-health business has historically grown slower; this is not surprising due to the margins these types of products generate, and the company's broad, mature footprint in this sector. However, with brands like Tylenol, Band-Aid, Listerine, and Aveeno included in this business, it's safe to say there's a continued road for growth ahead. And its spinoff will also ease constraints on the growth trajectories of the other two businesses.

Johnson & Johnson's pharmaceutical division covers everything from immunology to cardiovascular ailments to infectious diseases, while its medical devices encompass everything from joint replacements to sports medicine solutions to spinal-care devices to heart pumps. Management is estimating that its pharmaceutical division alone will hit the $60 billion revenue mark by the year 2025.

Johnson & Johnson's consumer-health division delivered operational sales growth of 4% in 2022, while its pharmaceutical and medical-devices divisions yielded sales growth of 7% and 6%, respectively. Total sales and earnings for the year came in at $94 billion and $21 billion. As of 2022, Johnson & Johnson was the second largest pharmaceutical and healthcare company in the world by revenue, second only to Pfizer.

The company is one of only two public entities that have garnered the highest credit rating (AAA) awarded by S&P Global Ratings. If you're looking for stability, steady growth, and a reliable dividend, Johnson & Johnson seems like a no-brainer healthcare stock to buy and hold for the long haul.

3. DexCom

DexCom (DXCM -7.67%) has experienced some of the market pressure afflicting growth-oriented stocks over the last year. But it's beaten the market with a total return of about 13% over the trailing 12 months, and investors are still looking at a five-year total return of about 720%.

The company is currently celebrating another huge business win, with the launch of its latest product, the G7 continuous glucose monitoring (CGM) device. DexCom's CGM products are used by about 1.7 million people worldwide as of the end of 2022, and are the most widely covered and reimbursed of any such products on the market.

Despite DexCom's broad footprint, there's plenty of room left for the company to expand in the years ahead, as the addressable market for CGM wearers isn't just underpenetrated but growing. People with both Type 1 and Type 2 diabetes can wear CGMs, and there's growing evidence that there could be benefits for those with prediabetes as well.

It's estimated that there are more than 537 million individuals living with diabetes worldwide, and more than 1 million people are diagnosed with the disease in the U.S. alone each year. Meanwhile, another 541 million individuals globally are at high risk for developing Type 2 diabetes, which accounts for the lion's share of all diabetes cases.

DexCom continues to work aggressively with private and public entities to expand coverage for CGM wearers, another key catalyst for long-term adoption of these devices. And in the company's 2022 earnings call, Chief Executive Officer Kevin Sayer noted that "Collectively, our international access initiatives have helped us expand our reimbursed coverage by 3.5 million lives over the past 18 months."

The company saw revenue pop 19% in 2022 to $3 billion, while raking in earnings of $341 million, a 57% increase year over year. With its considerable and expanding market opportunity, profitable business, and clear, consistent demand for its products, DexCom looks like a compelling choice to add to a diversified basket of stocks.