Over the past few years, several hot investing trends swept through Wall Street. First, it was the metaverse, and now it's artificial intelligence; there will likely be some new big thing in a year or two. But one industry that remains consistently attractive to invest in is healthcare. That should remain the case through the next decade -- and likely much longer -- unless someone invents an all-purpose cure for all diseases.
Assuming that won't happen, let's consider two healthcare stocks worth buying and hanging onto for the next 10 years: Abbott Laboratories (ABT 0.63%) and Intuitive Surgical (ISRG 0.59%).
1. Abbott Laboratories
Abbott Laboratories has a deep and diversified presence in healthcare, especially in its medical-devices area of expertise. The company's results have been somewhat volatile in recent years due to its diagnostics segment, which has seen its revenue fluctuate based on COVID-19 cases. Abbott markets several coronavirus diagnostic products. In the first quarter, the company's revenue of about $10 billion declined by 11.4% year over year for this reason.
Putting aside its coronavirus-related sales, Abbott Laboratories' top line actually jumped by 11.5% year over year organically. One of the company's most important growth drivers is its diabetes care unit -- specifically its continuous glucose monitoring (CGM) franchise, the FreeStyle Libre. Second-quarter FreeStyle Libre sales of $1.3 billion increased by almost 23% year over year.
There was at least one other important highlight regarding this product line recently. In June, the FreeStyle Libre 2 became the first and only CGM device to obtain reimbursement from French health authorities for all diabetes patients who use basal insulin. Previously, only type 1 patients and those with type 2 on intensive insulin therapy were eligible. Similar developments in both Japan and the U.S. have added 3 million potential customers who are covered for Abbott's CGM devices.
If Abbott can grab even a 20% share of this newly reimbursed market, these regulatory developments could meaningfully move the needle for the company. And given the growing number of diabetes patients worldwide, Abbott could ride the CGM tailwind for a long time.
Of course, the company has other growth drivers. It's also an excellent dividend stock. Abbott has hiked its payouts for 51 straight years, making it a Dividend King. The company's current yield of 1.9% isn't massive, but still higher than the S&P 500's average of 1.5%.
Abbott Laboratories has outperformed the S&P 500 over the past decade, and it has done so by a wider margin when considering total returns that include dividends reinvested. In my view, the company is well-positioned to do the same over the next 10 years.
2. Intuitive Surgical
Intuitive Surgical is the leader in the robotic-assisted surgery (RAS) market. It has delivered excellent returns over the past 10 years thanks to growing adoption of the technology -- and its famous robot device, the da Vinci Surgical System, which has helped increase its revenue and earnings at a good clip.
The past three years have been challenging for Intuitive Surgical. It's dealt with a drop in elective procedures induced by the pandemic, inflation, and supply chain and labor issues. But the company is rebounding. It ended the second quarter with an installed base of 8,042 systems, representing a 13% increase year over year. Revenue of $1.76 billion jumped 15% compared to the year-ago period. On the bottom line, adjusted earnings per share of $1.42 came in 24.6% higher than the prior-year quarter.
ISRG Revenue (Quarterly) data by YCharts.
Intuitive Surgical had a solid quarter, but its long-term prospects are even more attractive. Despite making tremendous progress in the RAS market, fewer than 5% of eligible procedures are performed robotically. However, the da Vinci system allows physicians to conduct minimally invasive surgeries that lead to better health outcomes for patients. So the number of robotic surgeries could continue to increase far beyond the next decade, and as it does, the company will make more money by selling more instruments and accessories to accompany its crown jewel.
Intuitive Surgical has a solid reputation in this field that's second to none. It also benefits from an economic moat thanks to its high switching costs -- the da Vinci system costs between $0.5 million and $2.5 million and needs hours of training to master -- and intangible assets in the form of patents that protect it against competitors.
The company's recent headwinds do little to change its prospects. That's why you can safely keep this stock in your portfolio through the next 10 years.
