The stock market's short-term volatility can sometimes cloud investors' judgment and cause panic selling. But history has demonstrated time and again that a buy-and-hold strategy is one of the best ways for the average person to generate wealth. So it pays to target stocks with solid prospects worth keeping through all the various market volatility.
In that spirit, we asked three Motley Fool contributors to discuss buy-and-hold-worthy growth stocks. Read on to find out why they picked Axsome Therapeutics (AXSM 0.27%), Eli Lilly (LLY 1.19%), and Vertex Pharmaceuticals (VRTX -0.06%).
This biotech is just getting warmed up
Prosper Junior Bakiny (Axsome Therapeutics): What a difference 12 months make. At this time last year, Axsome Therapeutics was generating no revenue; it had just one approved product to its name -- Sunosi, a narcolepsy therapy it had just acquired. But since then, the biotech has scored a major approval, namely that of major depressive disorder (MDD) medicine Auvelity.
In the first quarter, Axsome Therapeutics recorded revenue of $94.6 million. That number will keep on growing thanks to Auvelity and Sunosi, which can go on for a while without having to fear losing patent exclusivity. And Axsome's lineup will improve as it chases important new indications for Sunosi and Auvelity, and brand-new approvals.
In the next few years, the biotech could add three new medicines: AXS-07, AXS-12, and AXS-14, which target migraines, narcolepsy, and fibromyalgia, respectively. Meanwhile, Auvelity is aiming for a label expansion in treating Alzheimer's disease agitation, while Sunosi is going after ADHD.
Axsome's greatest strength is its rich, late-stage pipeline that should yield solid clinical and regulatory progress. And while the drugmaker has easily outperformed the market over the trailing 12-month period, in my view, its current $3.5 billion market capitalization still comes with significant upside potential.
Look for Axsome to grow its revenue at a good clip from here on out, even before brand-new approvals, since the launch of Auvelity in treating MDD happened less than a year ago. And once new products arrive, the company's financial results should improve further. That's why Axsome Therapeutics is a biotech stock worth holding onto today.
Eli Lilly is the ultimate buy-and-forget healthcare stock
David Jagielski (Eli Lilly): If there were only one growth stock I could buy right now, it would be Eli Lilly. The company has the best of both worlds -- strong financials and an incredibly promising pipeline. Unlike businesses that have to focus on risky acquisitions to fuel future growth, Eli Lilly only has to look within its own operations and invest in its existing products to find some terrific growth opportunities.
And investing in its operations is what it is doing, with Eli Lilly recently announcing it will invest $1.6 billion in two new manufacturing locations that will help it pump out more products to meet growing demand. There could, however, be an even greater need for more supply down the road if the company's Alzheimer's drug, donanemab, obtains approval from the Food and Drug Administration this year. Mounjaro is another drug to watch as it may get the green light for helping people lose weight, and if that happens, demand for that could be through the roof as well. The company already obtained approval for Jaypirca earlier this year to treat a rare type of blood cancer.
Eli Lilly's growth potential is massive from all the products it has in development. The company expects that it could launch up to five new drugs this year, which would set up some impressive growth opportunities ahead for the business. And that complements an already robust and diverse portfolio, which features five drugs that brought in more than $2 billion in annual revenue last year, including top-selling diabetes drug Trulicity, which generated $7.4 billion in sales.
This healthcare stock has a reputation for being a bit of a growth beast over the years, with Eli Lilly's share price jumping an impressive 700% in the past decade. That's well above the S&P 500's 155% gains over the same stretch. Eli Lilly still has a bright future ahead, and it wouldn't be surprising for the stock to continue to deliver stellar returns for its investors.
There's nothing to dislike about this biotech
Keith Speights (Vertex Pharmaceuticals): I can usually spot negatives with growth stocks. But with Vertex Pharmaceuticals, there's nothing to dislike. Seriously.
Vertex is highly profitable. It has a massive cash stockpile. The company's cystic fibrosis (CF) drugs don't have any competition. With AbbVie recently throwing in the towel on its CF program, only two potential rivals remain with clinical-stage CF candidates. Both have a long way to go to even have a chance of competing against Vertex.
CF still represents a significant growth opportunity for Vertex. The company's newest CF therapy candidate -- a triple-drug combo featuring vanzacaftor -- could be its most powerful and profitable entrant in the CF market so far if it wins regulatory approval. That approval could be right around the corner. Vertex expects to wrap up late-stage testing by the end of this year.
But the big biotech has even bigger growth prospects outside of CF. Vertex and its partner, CRISPR Therapeutics, await regulatory approvals for exa-cel. The gene-editing therapy could rake in billions of dollars in sales as a functional cure for sickle cell disease and transfusion-dependent beta-thalassemia.
Vertex's pipeline also features two other promising candidates in pivotal clinical studies. The company thinks that VX-548 has tremendous near-term commercial potential as a non-opioid therapy for acute pain. Inaxaplin appears to be on track to become the first drug approved to treat APOL1-mediated kidney disease, an indication that affects more patients worldwide than CF.
You might think that with these multiple big growth drivers, Vertex stock would be ridiculously expensive. That's not the case. The drugmaker's price-to-earnings-to-growth (PEG) ratio of 0.51 is exceptionally low. There truly is little to dislike about this biotech stock -- and a lot for investors to love.
