While some stocks may not be attracting quite the same hype they were a few years ago, that doesn't mean the quality of their underlying businesses has evaporated. If your intention is to own great businesses with greaat potential and see them grow over the long term, it's never too late to buy their stock.
No single stock is going to generate life-changing returns overnight, but slowly and steadily building your basket of stocks can help you move toward your long-term financial goals. If you're looking for companies with strong competitive advantages and financials to match, here are two businesses to consider if you have cash to put into stocks right now.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX -0.06%) has seen shares pop by more than 23% since the beginning of 2023. The healthcare stock specializes in medicines and therapies targeting rare diseases that historically have been underserved by the medical community at large. Its current portfolio revolves around four drugs that treat the rare genetic disorder cystic fibrosis.
Since Vertex is still the only company with drugs on the market that treat the underlying cause of cystic fibrosis, it has been able to build a wide business moat around steady revenue growth and profits. Around 160,000 individuals are thought to be living with cystic fibrosis worldwide. There was a time when this diagnosis was akin to a death sentence, but the introduction of these medicines to the market is helping patients live better and longer.
Moreover, the expanded approval of Vertex's portfolio of drugs by regulatory authorities worldwide is opening access to these medicines to younger cohorts of patients, widening the potential addressable market and augmenting the overall growth potential. Cystic fibrosis is just one lucrative slice of the rare disease drug market that Vertex has set its sights on, though.
The company, along with its drug development partner CRISPR Therapeutics, recently became the first in the world to garner approval for a CRISPR-based therapy. U.K. regulatory authorities just gave the green light to Casgevy (to be marketed as exa-cel in the U.S.) as a potential one-time functional cure for patients aged 12 and up with sickle cell disease or transfusion-dependent beta thalassemia.
Vertex and CRISPR Therapeutics are set to receive the U.S. Food and Drug Administration's decision about approving exa-cel as a one-time therapy for sickle cell disease before the month is out, while the agency's ruling on indicating the therapy for transfusion-dependent beta thalassemia is expected to come early next year. Vertex already has a collection of blockbuster drugs on its hands, and this latest could easily be the next.
The company is also working on a non-opioid drug candidate for acute and neuropathic pain, a triple-combination therapy for cystic fibrosis patients, and a mNRA-based therapy for cystic fibrosis patients who can't take its existing lineup of drugs, to name several other potential blockbuster products in the works. Investors may want to grab a slice of this business now. It looks as though the runway to growth ahead may be just beginning.
2. Shopify
Shopify (SHOP 1.11%) is currently trading up by more than 105% from its price at the start of this year. The e-commerce giant has contended with the volatility that many growth stocks with a heavy reliance on consumer spending have faced in past quarters.
However, Shopify is steadily witnessing positive growth in multiple areas, including on the profitability front. Revenue totaled $1.7 billion in the third quarter of 2023, a solid bump of 25% from the same period one year ago.
Gross payments volume surged 32% from one year ago to $33 billion. Meanwhile, Shopify supported $56 billion in gross merchandise volume in the three-month period, a 22% increase on a year-over-year basis. Gross profits for the third quarter totaled $901 million, up 36% from one year ago.
Importantly, the company brought in generally accepted accounting principles (GAAP) net income of $718 million, compared to a net loss of $159 million in the same period in 2022. Shopify has also turned into a free-cash-flow giant. Not only did the third quarter represent the fourth consecutive quarter of positive free cash flow for the business, but that recent figure totaled $276 million, or 16% of revenue.
One of the things I love about Shopify's business is the way this company continues to evolve to meet the needs of merchants, both online and offline. As important as e-commerce is, brick-and-mortar isn't dead. Management is capitalizing on this dual reality in retail. For example, the company launched Retail Plan in the third quarter, described as "a new pricing plan for brick-and-mortar businesses selling primarily in-person that includes all Shopify POS Pro features as well as tools to build a simple online presence."
Other recent highlights include a new enterprise-grade payments hardware system called POS Terminal, expansions to its cross-border commerce solution Shopify Markets Pro, and a new app integration with Amazon that allows merchants to incorporate the Buy with Prime app into their checkout process.
Consumer wallets are more constrained than they were in the past. Even so, this business is proving that it can adjust to the changing needs of consumers while giving merchants what they need to build successful businesses both on and off the web. For long-term investors, that may be a buying proposition that's just too good to overlook.
