Investors are always looking for the businesses that are capable of breaking out from the pack, but not every winning stock looks the same. Some companies are like sprinters, expanding massively and then experiencing periods of slower growth before setting off again. Others are more like marathon runners, accumulating value steadily and avoiding mishaps.
Both types of investment can be suitable for long-term wealth-building, so let's investigate one stock that fits the bill for each of those patterns.
Image source: Getty Images.
1. Catalyst Pharmaceuticals
Catalyst Pharmaceuticals (CPRX -4.12%) is a small but rapidly growing biotech that just made a major strategic move that will power returns for shareholders for years to come. The company's flagship (and for the moment, only) product is Firdapse, a drug that helps people with Lambert-Eaton myasthenic syndrome (LEMS). The rare autoimmune condition causes muscle weakness and fatigue, and roughly 50% of the people who have it end up developing small cell lung cancer.
Strong demand for Firdapse and entry into international markets like Japan have been the company's engine of growth over the last few years, and further penetration of those markets is likely to keep the party going. For 2022, it expects to rake in roughly $214 million in revenue, making for a vigorous 52% rise compared to 2021. And for 2023, the company forecasts total revenue of up to $385 million, meaning that its top line could grow by as much as 80% year over year. Given that the company is already strongly profitable, that's very likely to lead to significant share price appreciation, to say the least.
The reason for Catalyst's rapid pace of acceleration is its recent purchase of the epilepsy drug Fycompa, which it bought from Eisai in early 2023 for $160 million in cash. Management anticipates the medicine to bring in around $130 million for the 2023 fiscal year, and that total could rise in the years that follow if Catalyst uses the same strategy of entering international markets and seeking expanded indications like it did with Firdapse, which it likely will.
Despite the biotech's long growth runway thanks to the Fycompa purchase, it isn't an investment without risk. Teva Pharmaceuticals plans to try to make a generic copy of Firdapse, though Catalyst Pharmaceuticals signaled its intent to fight the attempt in court. If a generic of Firdapse does get commercialized, it'll spell big trouble. But the revenue from Fycompa will ensure that it isn't the end of the line for the stock.
2. Costco
As a Costco Wholesale (COST -0.55%) member and shareholder, it's my conviction that there are few companies as worthy of a long-term hold as Costco is. With its strong all-weather financial performance, shareholder-friendly policies, and history of catering to the needs of its customers, there's a lot to appreciate about this company and its marathon-style approach to its market.
In the last 10 years, Costco's quarterly net income grew by an average of 13.4% year over year, and its annual net income in 2022 totaled more than $5.8 billion. To do that, it did the same stuff it always does: sell bulk groceries and consumer goods to its members at a price that's close to its cost while opening new warehouses to expand its footprint. 2022 saw the opening of 23 new locations, and by the end of January 2023, Costco boasted 848 stores worldwide. And with more than $11.6 billion in cash, there's little preventing it from repeating its performance in 2023 and beyond.
Even the difficult economic conditions of the pandemic and inflation didn't slow this company down by much. As consumers seek to use their money efficiently, Costco is an obvious choice -- its prices are low and management is committed to not raising them unnecessarily, even if competitors do. That means it's a safer pick than other growth stocks in times of turbulence.
Finally, shareholders will get rewarded the longer they're willing to hold Costco's shares thanks to its dividend, which currently yields 0.7%, and its share buybacks. In each of the last 10 years, its payout per share has grown by an average of 12.6%, and there's little indication that pace will slow anytime soon. Buying shares today means getting the advantage of dividend growth over time, not to mention the business's steady share price appreciation and global expansion.
