Healthcare and cannabis are potentially risky but high-growth industries that tend to be unaffected by the state of the economy. Demand for what they supply is fairly consistent.
Purchasing stocks in resilient companies that can withstand market ups and downs is a sound long-term investment strategy. Here are two such outstanding companies that are screaming buys in May.
MDT EPS Diluted (Annual) data by YCharts.
Medtronic: a strong player in the medical device industry
Medtronic (MDT 0.95%), based in Dublin, Ireland, is a well-known player in the medical device industry. Its business has been stable despite the economic downturns, which is evident from the steady growth in revenue and earnings over the last few years. Medtronic has also made a name for itself by hiking its dividend for 45 consecutive years.
Recent results for its fiscal 2023 third quarter were slightly affected by macroeconomic headwinds, according to the company. Total revenue came in flat at $7.7 billion, the same as in the previous year. Adjusted earnings per share declined 4% year over year to $1.30.
However, Medtronic's leaders anticipate that short-term challenges will abate, allowing revenue to increase in the coming quarters. In March, the company increased its quarterly dividend by 8% to $0.68 per share. It ended the quarter with $2.5 billion in free cash flow, sufficient to support its growth strategies and dividend payouts this year.
Between 2022 and 2029, the global medical device market could grow at a compound annual rate of 5.5%, reaching $719 billion. With its diverse product portfolio and plans to expand into the fast-growing robotic surgery market, Medtronic has excellent long-term opportunities in this field.
Medtronic has something else for investors, too. Its dividend yield is about 3%, which is significantly higher than the S&P 500's average yield of 1.7%. So it is not only a growth stock but also an income stock, allowing investors to receive regular passive income while their investment grows.
The stock is valued cheaply now, making it a good time to invest.
Cresco Labs: a strong player in the cannabis industry
Chicago-based Cresco Labs (CRLBF 1.00%) might not have a firm grip on the American cannabis market yet, but it likely will soon. The company is expected to close on the acquisition of another cannabis company, Columbia Care, by June. Cresco's portfolio will grow by 130 dispensaries as a result of this deal.
Even if the deal with Columbia doesn't go through for regulatory reasons, Cresco can still thrive on its own. With only 61 dispensaries, the company earned $843 million in revenue in 2022, putting it in direct competition with the larger players.
For comparison, Trulieve Cannabis operates 3 times as many dispensaries (181) but earned only 47% more in revenue ($1.24 billion) in 2022. Meanwhile, Curaleaf Holdings, which operates 152 dispensaries, earned $1.3 billion in revenue in 2022.
Cresco Labs is working to cut costs to achieve long-term profitability by closing down underperforming facilities. This strategy cost it some money in the fourth quarter. Adjusted EBITDA fell to $30 million from $57 million the previous year, while revenue fell 9% to $199 million in the fourth quarter of 2022.
Federal cannabis legalization remains a long shot in the United States. Cresco, however, has a lot of opportunities from key state markets, such as Ohio, Pennsylvania, and Florida, as they fully legalize cannabis.
Cresco could also choose to expand internationally, where markets are growing rapidly right now. The global cannabis market could be worth $149 billion by 2031, according to Allied Market Research.
Cresco Labs ended the year with $122 million in cash, cash equivalents, and restricted cash, which should help fuel its future growth plans regardless of what direction they take.
The stock is currently undervalued, with a price-to-sales ratio of just 0.5, making this an excellent time to buy.
