In tough economic times, many companies see their revenue decline. And in good times, these companies may see just the opposite -- revenue takes off. It's fine to include these players in your portfolio. But it's also a great idea to buy companies that generally deliver earnings growth no matter what the market is doing.
The perfect place to look for these stocks is in the land of healthcare. That's because people need medicines or procedures regardless of the economic environment. These stocks usually won't make extreme moves. Instead, they may steadily lead your portfolio higher over time. Let's check out two stocks to buy now and possibly hold forever.
1. Intuitive Surgical
Intuitive Surgical (ISRG 0.59%) sells and leases robotic surgical systems to hospitals for a wide variety of minimally invasive procedures -- from hernia repair to hysterectomy. The company is the global leader by far, with nearly 80% market share, according to BIS Research.
There's reason to be optimistic about Intuitive keeping much of its market share. First, surgical robots are million-dollar investments, so hospitals probably won't aim to switch to another provider if they're satisfied. Second, most surgeons train on Intuitive's flagship Da Vinci system. It's a platform they're used to, so they're likely to favor it. All of this means Intuitive has a solid moat.
Another thing I like about Intuitive is the way it generates revenue. It doesn't just sell robotic systems. It also sells accessories and instruments and service packages to maintain the platforms. And these items represent recurrent revenue. So, each robot sold or leased results in additional revenue every time a procedure is performed. In fact, revenue from accessories and instruments surpasses Intuitive's revenue from robot sales.
Elements like rising inflation or COVID-19 disruptions have weighed on earnings. Higher inflation has lifted costs. And the pandemic has resulted in postponed surgeries and therefore, postponed revenue. But these are temporary problems. And Intuitive has generally grown earnings over time.
Today, Intuitive shares trade for 48 times forward-earnings estimates. Considering Intuitive's market leadership and moat, they are well worth that price.
2. Pfizer
When most people think of Pfizer (PFE 0.55%) these days, they probably think of the company's coronavirus program. Last year, Pfizer generated more than $37 billion from its Comirnaty vaccine and about $18 billion from Paxlovid, its oral antiviral treatment. These figures are set to decline this year as we head toward a post-pandemic situation.
But Pfizer expects the products to remain blockbusters well into the future. And at the same time, the big pharma player is heading into a whole new era of growth through the development of its own products beyond COVID-19 and through acquisitions.
First, the bad news: Pfizer expects to lose $17 billion in revenue from 2025 through 2030 as some of the company's older drugs lose exclusivity. But here's the good news: Pfizer aims to bring 19 new products or indications to the market within an 18-month period. That's a record for the company. Fifteen of those are from Pfizer's own pipeline, and the others are from recent acquisitions.
Pfizer predicts these fifteen potential products will generate sales in 2030 of about $20 billion. And products gained through acquisition should bring in $25 billion in 2030. So, these new products could more than compensate for the upcoming declines in older blockbusters.
This pharma giant also believes in rewarding shareholders. The company returned $11 billion to investors last year in the form of dividends and share buybacks.
Now let's take a look at valuation.
PFE PE Ratio (Forward) data by YCharts.
Pfizer trades for about 12 times forward-earnings estimates, making it cheaper than peers such as Merck or AbbVie. This looks like a steal for a company offering passive income and a ticket to long-term earnings growth.
