Sometimes it's hard to know which stocks to pick amid the dozens of options available on equity markets. But occasionally, some companies look so attractive that the decision isn't so difficult. Typically, they boast excellent track records, solid economic moats, and plenty of growth potential.
Let's look at two stocks that fit this description: Vertex Pharmaceuticals (VRTX -0.06%) and Visa (V -0.23%). For those with $1,000 to spare -- that's not being saved for a rainy day -- let's find out why putting that money to work by investing in these companies would be a brilliant move.
1. Vertex Pharmaceuticals
One of the keys to success as a biotech company is to develop medicines for diseases that are at least as good as the existing standards of care. Vertex Pharmaceuticals' goal goes further. The drugmaker focuses primarily on developing therapies for illnesses where there are no treatment options, or at least where there aren't any that treat the underlying causes of the disease in question.
This approach has produced excellent results, most notably in the cystic fibrosis (CF) field, where Vertex Pharmaceuticals is the undisputed leader. No other company in the world has created approved therapies that compete with Vertex's. Therein lies the biotech's competitive edge: a monopoly in its core therapeutic area. As a result, Vertex's results have been stellar in the past decade.
VRTX Revenue (Annual) data by YCharts
So, economic moat, check. Track record, check. But where do Vertex's growth opportunities lie? First, the company isn't done growing in CF. More than 20,000 patients (out of 88,000) still need treatment. Vertex is working on enrolling those eligible for its current medicines while developing new ones for patients who can't be treated with any of its drugs.
Then, there is the company's non-CF pipeline. The company's mid- and late-stage programs should yield several approvals in the coming years. Two of Vertex's work-in-progress therapies that fit seamlessly into its strategy are inaxaplin, a potential treatment for APOL1-mediated kidney disease, and VX-864, an investigational medicine for alpha-1 antitrypsin deficiency. But the company's next launch should be exa-cel, a potential one-time curative treatment for a duo of genetic blood diseases with few therapy options.
And that's just the tip of the iceberg, as Vertex Pharmaceuticals boasts many other promising programs. Sustaining excellent revenue and earnings growth -- and stock market performances -- shouldn't be a problem for the biotech in the next 10 years. At current levels, $1,000 is good for two shares of Vertex with plenty of spare change. Money well spent.
2. Visa
Visa is one of those companies whose services people use every day. It is a leader in providing payment networks that help facilitate credit card transactions. Visa has only one notable direct competitor in this field, namely Mastercard.
Together, these two companies form a duopoly that will be exceedingly difficult to topple. That's because Visa benefits from a network effect. The more retailers there are within its ecosystem, the more attractive it becomes to consumers.
V Profit Margin data by YCharts
Another aspect of Visa's business that's very attractive is the company's high profit margin. With an already established payment network, additional transactions don't add much to the company's costs.
V Revenue (Annual) data by YCharts
Visa's moat and excellent margins have fueled its performance over the past decade. But there is much more room to grow for the company, although its services and the cards that bear its brand already seem ubiquitous. There are at least two things that can provide a tailwind for the Visa. First, a general improvement in economic conditions leading to more spending by consumers and more credit card transactions.
Second, Visa could continue helping to displace whatever cash and check transactions remain. Experts generally predict that the global economy will keep improving, at least for the foreseeable future. And while it may not seem that way, consumers still purchase trillions in cash and checks. That means there is plenty of room for Visa to grow. Investors focused on the long game can't go wrong with this stock -- and $1,000 can afford four shares.
