It hasn't been the easiest time for investors across a range of industries and sectors over the last few years. The good news is that when you're buying stocks to hold onto for anywhere from five years to decades, you don't necessarily need to worry about what the market is doing month to month. Your main concern is whether the thesis for why you bought a particular business remains intact.
While healthcare stocks may not represent the growth opportunities some investors are looking for these days, the steady trajectory of these businesses can provide an intriguing opportunity to park cash amid both bull and bear markets. If you're looking for no-brainer healthcare companies to buy right now and hold for at least a decade, here are three names you'll want to consider.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX -0.06%) earns annual profits in the billions on the back of a relatively small group of products. In fact, it currently has just four approved products on the market. However, these products pulled in revenue of $9 billion and net income of $3.3 billion in 2022 alone.
Vertex is the leader in the cystic fibrosis treatment market, a space valued at around $6 billion at the time of this writing. This market is expected to grow to about $13 billion by the beginning of the next decade. The company is the only player in this space whose drugs actually target the genetic cause of the disease.
It's estimated that there could be as many as 163,000 individuals globally who have cystic fibrosis. The market opportunity for Vertex also remains consistent, because these aren't one-time cures, but rather drugs that require strict long-term twice-daily regimens in most cases.
Vertex is building out a long-term plan to launch five new products in the next five years, all of which represent multibillion-dollar market opportunities. These include a gene-editing therapy for two rare blood disorders that could garner its first approval as soon as this year, stem cell therapies for diabetes, a non-opioid drug for acute pain, and the first functional cure for the rare kidney disorder APOL1-mediated kidney disease. For investors who want to follow this growth story, even a modest investment could be a wise move.
2. Intuitive Surgical
Intuitive Surgical (ISRG 0.59%) has been the leader in the surgical robotics industry for over two decades now, since its first da Vinci surgical system was approved by the U.S. Food and Drug Administration. Since that time, the company has released multiple generations of its flagship system, which is approved for a variety of procedures including cardiovascular, thoracic, and colorectal surgeries.
Intuitive Surgical also has another product called the Ion, which is specifically designed to facilitate minimally invasive lung biopsies. Despite the fact that robot-assisted surgery is not a new phenomenon, the adoption of these tools by healthcare providers is still in the relatively early days.
According to a recent report by consulting firm Bain and Company, while most doctors are interested in using surgical robotics, only 53% are in practice. There are also use cases for surgical robotics in both traditional open surgery as well as minimally invasive surgeries The minimally invasive procedures are where these systems are mostly deployed.
In short, there's still a lot of room for this business to run. The company pulled in about $5.2 billion in revenue and $1.2 billion in profits in the first three quarters of 2023. That's compared to figures of $4.6 billion and $1 billion, respectively, in the same nine-month period in 2022. I wouldn't expect astronomical jumps on the top or bottom lines from a business at this level of maturity. Steady revenue growth and profitability is what counts and Intuitive Surgical continues to deliver on both fronts, which could induce some investors to take a second look.
3. Teladoc Health
Teladoc Health (TDOC -2.40%) hasn't received many gold stars from investors in recent quarters. This was mainly because the company went from high levels of performance during the pandemic to bouts of severe unprofitability. Most of Teladoc's unprofitability of late was the result of noncash losses, including some ugly multibillion-dollar write-offs related to its purchase of Livongo during the pandemic.
The other notable driver of Teladoc's unprofitability relates to stock-based compensation, which incidentally is also a non-cash loss. In short, Teladoc needs to get its bottom line back into the green, but its unprofitability isn't stemming from major operational issues or actual cash losses. It's also drastically reduced its net losses in the last few quarters.
The business derives most of its revenue from access fees that employers and insurers pay, as well as visit fees from individual patients. Access fee revenue totaled $1.1 billion for the first half of 2023, up 12% from one year ago. For reference, overall revenue for the six-month period was $1.3 billion, an 11% bump on a year-over-year basis.
Broken down by segment, Teladoc's integrated care business brought in $710 million in revenue for the first half of the year, while its teletherapy business BetterHelp accounted for the remaining $564 million of that top-line figure. The pandemic accelerated the telehealth boom, but it didn't create it. Teladoc is building a platform that makes it accessible for anyone, anywhere, to get the healthcare they need, from virtual therapy services to general wellness visits, and it's doing it at a scale few competitors can rival. That's a long-term advantage that investors shouldn't overlook.
