Growth stocks have faced continued headwinds from a tough economic landscape and volatile investor sentiment over the past year. While stocks in this sector have responded in varying ways, even more important is for investors to focus on the underlying businesses at play and whether they can continue to drive growth in the long term.
If you're looking for superior stocks to buy and hold, even if a full-fledged recession hits, here are two names to consider adding to your buy basket before the month is out.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX 1.25%) has built a thriving and profitable growth story on the power of four products, all of which treat the rare genetic disease cystic fibrosis. Cystic fibrosis afflicts more than 160,000 people worldwide, and in the past, a diagnosis was something close to a death sentence. Today, the emergence of a new class of drugs called CFTR modulators -- which treat the underlying cause of cystic fibrosis -- are helping patients live longer and better.
Vertex is the only company with approved CFTR modulators on the market. Its portfolio of drugs brought in profits of more than $3 billion in 2022. With a foothold in one lucrative and expanding realm of the rare disease drug market, Vertex is now looking to other underserved target markets to build on this momentum.
One candidate that it's working on with Moderna is designed to treat the thousands of cystic fibrosis patients who can't take CFTR modulators. Another promising candidate is Vertex's non-opioid candidate for acute pain, called VX-548, which is currently in phase 3 testing. Chief Operating Officer Stuart Arbuckle said this about VX-548 in the company's 2022 earnings call:
There are four aspects critical to framing the acute pain opportunity for Vertex. One, there is a significant unmet need due to the limitations and drawbacks of currently available treatments. Two, the market is large today, even with 90% generic prescribing. Three, prescribing is concentrated in the hospital setting and thus addressable with a specialty commercial infrastructure. And four, there is broad stakeholder recognition of the need for new therapies ... millions in the U.S. suffer from acute pain each year.
As of the end of 2022, Vertex was sitting on a stockpile of cash and investments in the amount of nearly $11 billion, up more than 40% from its liquidity position at the close of 2021. With Vertex's footprint in the multibillion-dollar cystic fibrosis treatment market and its sights set on other massive addressable markets, healthcare investors who buy in now could be poised for generous returns over the next five to 10 years and well beyond.
2. Airbnb
Airbnb (ABNB -0.96%) has kept up a pace of growth in recent quarters that has broadly eclipsed many other travel stocks -- a continued testament to the underlying strength of its products and services. While the travel industry may face notable headwinds if a full-fledged recession takes root, the long-term tailwinds driving this industry bode well for a well-positioned business like Airbnb that benefits from a wide variety of travelers and their needs.
There's also the reality that the way that many people travel isn't quite the same as it was before the pandemic. Yes, business travel has returned to a certain extent, and people are increasingly booking cross-border and leisure travel again.
However, there's also been the emergence of a newer type of traveler, one with the freedom to live and work in different locations with a degree of independence that was virtually unheard of a decade ago thanks to the remote work revolution that was accelerated by the COVID-19 crisis. More than one-fifth of bookings on Airbnb's platform are from long-term stays (28 days or longer). In short, people are living, not just taking vacations, on Airbnb.
On the host side, more and more people are looking to participate as a way to make an income or supplement one. This was evidenced by the considerable jump in listings that Airbnb saw in 2022 alone. At the end of 2022, the company had 6.6 million active listings on its platform, an increase of a whopping 900,000 listings compared to the end of the prior year.
CEO Brian Chesky had the following to say about this notable jump in active listings against the backdrop of the current travel environment:
First, demand drives supply. Hosts are attracted to the supplemental income that they can earn on Airbnb, which is often critical during tough times. Second, our product improvements are working. Over the past two years, we've made it more attractive and easier to become a host. Just this past November, we introduced Airbnb Setup, where prospective hosts can connect with Superhosts for free one-to-one guidance all the way through their first reservation. The number of new active hosts recruited with the help of our Superhosts increased by more than 20% compared to pre-launch.
Airbnb's profitable business is laying the groundwork for a resilient path to future growth. Even if travel habits change in the short term as economic challenges persist, the versatility of choices that Airbnb's platform provides to both travelers and hosts -- an advantage that is proving to be a key growth catalyst even in the current environment -- are a durable tailwind that may compel investors to scoop up this stock now.
