In a market fraught with volatility, you're not alone if you're searching for stocks that can provide enviable returns for years to come. While no stock is devoid of risk, and no investment is foolproof, companies with strong underlying businesses, core competitive advantages in their respective markets, a favorable financial track record, and strong leadership can deliver on these goals.
If you have $1,500 to put into stocks right now -- money that you don't need for regular expenses and can leave in your portfolio for several years at least -- here two names to consider putting on your list of buys.
1. Intuitive Surgical
Intuitive Surgical (ISRG -1.69%) has faced a coronavirus resurgence in key markets that has reduced the number of surgeries using its da Vinci robotic system. But the company has continued to expand its installed base of surgical systems around the world, and revenue has steadily grown. And Intuitive has consistently remained profitable.
The stock has risen by double digits since the start of the year, about twice as fast as the S&P 500 in that time. Investors are clearly pleased with the company's continued growth in a challenging environment, particularly with its first-quarter results.
Management said that COVID-related disruptions in surgery volumes persisted in the first three months of 2023, but operations using its da Vinci surgical robot still surged 26% compared to the prior-year period.
By the end of the first quarter, Intuitive Surgical had reached a total of 7,779 surgical systems installed worldwide, up 12% year over year. Compared to its installed base of systems in the first quarter of 2019, before the pandemic, that's a 52% increase on a four-year basis. The company reported $1.7 billion in revenue for the first quarter of 2023, with net income of $355 million.
Intuitive's resilience in a difficult business landscape goes back to the general durability of the need for its systems, which are used in a wide range of procedures, and the fact that it operates a razor-and-blades business model.
Its surgical systems generate recurring revenue from sales of replacement tools, instruments, software, training, and other services. Of that $1.7 billion in revenue in the first quarter, $427 million came from sales of its surgical systems, $986 million was derived from instruments and accessories sales, and $283 million from miscellaneous services.
Intuitive Surgical has the leading share of the global surgical robotics market, a multibillion-dollar industry that is still growing rapidly. Robotic surgery shortens recovery time for patients and enhances precision for results.
But robot-assisted surgeries still comprise a relatively small portion of all procedures. This gives Intuitive Surgical plenty of opportunity to leverage its competitive edge. For investors with a minimum investment horizon of three to five years, this is one of those stocks you can buy, hold, and add to again and again.
2. Upstart
Upstart Holdings (UPST -3.32%) has a relatively simple underlying mission: to disrupt and improve the way that credit is extended in a lending industry that has long had limited means of assessing creditworthiness. Historically, Fair Isaac's FICO scores have been the singular or primary method for a lender to determine whether or not to extend credit to applicants.
This has left out significant parts of the potentially creditworthy population, for several reasons. Upstart is changing this pattern and has few direct rivals operating at its scale. Its platform leverages more than 1,000 data points -- including a FICO score -- driven by artificial intelligence and machine learning to assess whether or not an applicant should be approved for a loan.
Management said in the first-quarter earnings presentation that its platform had 23 upgrades in the first three months of 2023 alone. With the largest upgrade in accuracy in the company's history, 84% of all loans processed through Upstart's platform are done on a completely automated basis.
The fact that Upstart's underlying model is constantly learning and improving has had many effects on its growth. It has enabled 173% more loan approvals than traditional U.S. banks, while experiencing the same default rate.
The evolution of Upstart's model has also meant that in a period with high interest rates, consumer loans are coming at a higher cost. Naturally, fewer consumers are going to apply for loans in this environment, and fewer institutional partners are going to fund them.
Historically, Upstart's platform has worked as a middleman in loan facilitation, while it carried very few actual loans on its balance sheet. But with institutional partners being more hesitant to risk their capital recently, it has accumulated more loans than normal on its balance sheet in the last few quarters.
But this funding issue seems to be showing signs of resolution. Chief Financial Officer Sanjay Datta said in the first-quarter earnings call that the company had locked down "multiple longer-term funding agreements, which we expect to deliver more than $2 billion in capital over the coming 12 months."
Upstart ended the first quarter with approximately 100% more banks and credit unions as partners than it had at the end of the same quarter in 2022. Clearly, institutional confidence in the power of Upstart's platform is still there. The continued improvement of its platform and offerings in a tough environment are also excellent signs for its growth.
If this growth story continues, then as soon as interest rates decline and institutional capital is flowing more readily again, Upstart could see robust revenue gains and profitability.
