Sell in May and go away? The old adage hasn't proven to be great advice in 2023. The stock market has risen so far in June and could go even higher.
Three Motley Fool contributors think some stocks are no-brainers to buy this month. Here's why they especially like Axsome Therapeutics (AXSM -5.72%), Pfizer (PFE -0.12%), and Vertex Pharmaceuticals (VRTX 0.10%).
A rising star in the biotech industry
Prosper Junior Bakiny (Axsome Therapeutics): Sporting a market cap of just $3.3 billion, Axsome Therapeutics is a relatively small and unknown drugmaker. But it would be unwise to ignore this biotech just because of its size. In fact, the market has yet to factor Axsome Therapeutics' full potential into its share price, which makes the stock a no-brainer buy right now.
Over the next year, Axsome expects two phase 3 data readouts, two late-stage study initiations, and two regulatory submissions. These catalysts could send the stock price soaring if all goes according to plan. More importantly, though, Axsome Therapeutics is building a solid portfolio that could drive top-line growth for years.
Right now, the company's lineup includes just Auvelity, a medicine for depression, and Sunosi, which targets daytime sleepiness in narcolepsy patients. Within the next five years, Axsome plans to add label expansions to Auvelity in treating Alzheimer's disease agitation and Sunosi as a treatment for attention-deficit/hyperactivity disorder (ADHD).
That's in addition to three potential new products, AXS-07, AXS-12, and AXS-14. These investigational medicines target migraine, narcolepsy, and fibromyalgia, respectively. Axsome estimates that its late-stage portfolio addresses diseases with a patient population of over 60 million people in the U.S.
The biotech is still in the early innings of its growth story, which could last long before it runs into patent cliffs for any of its lineup and pipeline products. That's why, despite significantly outperforming the market in the past 12 months, Axsome Therapeutics remains an excellent stock to buy and hold for investors.
Pfizer's stock is too cheap to pass up
David Jagielski (Pfizer): Pfizer is trading at a baffling valuation right now, only 11 times estimated future profits. That's a steep discount compared to the average healthcare stock, for which investors are paying a forward earnings multiple of 17.
Pfizer's business is in a bit of a transition, with revenue from the company's COVID-19 vaccine and pill declining. Plus, there are drugs in its portfolio that face patent cliffs this decade.
But Pfizer has a strong track record for innovation and targeting strategic acquisitions to enhance its growth prospects. Investors are discounting this stock far too heavily when you consider that the company has an impressive pipeline that features 23 late-stage trials that are currently ongoing, plus dozens more products that are in earlier stages.
Its portfolio of migraine medications, enhanced by the acquisition of Biohaven Pharmaceuticals, could generate $6 billion in sales at its peak. Pfizer also has a weight-loss drug, danuglipron, that has achieved comparable results to those of Ozempic. That's another potential commercial winner in the works that could generate billions in revenue.
Pfizer has also been putting its resources to use, acquiring multiple businesses over the years. It's now eyeing cancer therapeutics maker Seagen in a mammoth $43 billion acquisition to bolster and diversify its operations even further.
On top of all that, the stock pays a dividend that yields 4.3% -- more than double the S&P 500 average of 1.7%. Pfizer has a lot to offer as an investment, but there simply hasn't been much excitement around the stock. That's a potentially huge mistake for investors, as the company has strong financials and the resources it needs to grow its business either organically or via acquisitions.
Buying the stock while it's around its low for the year could prove to be a steal of a deal.
Positive news on every front
Keith Speights (Vertex Pharmaceuticals): I have a hard time finding anything negative about Vertex Pharmaceuticals. The big biotech company seems to have positive news on every front.
Vertex's revenue and profits continue to grow thanks to its cystic fibrosis (CF) franchise. The company's monopoly in CF is now even more secure with AbbVie throwing in the towel on its CF program.
A new blockbuster outside of CF should be on the way. Vertex and CRISPR Therapeutics are banking on regulatory approvals in the U.S. and Europe for exa-cel in treating sickle cell disease and transfusion-dependent beta-thalassemia.
Exa-cel is just the first of several new drugs Vertex could launch over the next few years. The company also has high hopes for its non-opioid acute pain drug VX-548 and its new triple-drug CF combo featuring vanzacaftor. Late-stage studies for both therapies wrap up by late 2023 or early 2024. Another pivotal trial is underway for inaxaplin in treating APOL1-mediated kidney disease, an indication that affects more patients than CF.
Despite delivering impressive gains over the last 12 months, Vertex stock remains cheap considering its growth prospects. Its price-to-earnings-to-growth (PEG) ratio stands at only 0.52. Many investors view any PEG ratio below 1 as an attractive valuation. I think buying Vertex in June and waiting for it to go to the moon is a better strategy than selling in May and going away.
