Every portfolio should include a few monster stocks, or companies with huge market share and staying power, and products likely to drive growth for the long term. Healthcare is a great place to look for these stock market gems. Patients need their medicines and medical procedures, ensuring steady growth for these companies over time.
Two monster stocks that look particularly attractive at the moment are Eli Lilly (LLY 1.19%) and Medtronic (MDT 0.62%). Lilly is the seller of one of the world's most sought-after drugs and has a solid portfolio of other top-selling products. And Medtronic is a medical device giant that, thanks to a recent transformation plan, is set for a new phase of growth.
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1. Eli Lilly
Eli Lilly has taken center stage because it sells two drugs that doctors have been prescribing for weight loss, an area with demand so high that supply from Lilly and rival Novo Nordisk has fallen short of demand. Both companies are investing to increase production just to keep up with this booming market.
Lilly's Mounjaro is approved for type 2 diabetes, but doctors have prescribed it for weight loss, too. Late last year, regulators approved the same molecule -- tirzepatide -- for chronic weight management under the name Zepbound. Mounjaro brought in more than $2.9 billion in sales in the first nine months of last year, and there's reason to be optimistic about this drug and Zepbound moving forward. Goldman Sachs predicts the worldwide anti-obesity market could reach $100 billion by 2030, and that means there is plenty of potential for Lilly and Novo Nordisk both to win in this market.
On top of this, Lilly has other new products that have been driving earnings higher, with total revenue climbing 17% in the first nine months of 2023. And the company has steadily increased investments in research and development, with spend almost doubling from 2018. All of this has helped Lilly become speedier, decreasing the time from first human test to product launch by more than three years.
All of this should help Lilly continue to significantly grow revenue over time. And that's why, even though Lilly shares may look expensive at 50 times earnings estimates right now, they're well worth the price.
2. Medtronic
Medtronic is a medical device giant selling products across the areas of cardiovascular, diabetes, neuroscience, and medical surgical. Throughout its markets, its products hold No. 1 to No. 3 positions and have helped the company grow revenue over time.
But Medtronic's net income has had its ups and downs, so the medical device giant launched a transformation plan to boost efficiency, streamline operations, and set itself up for long-term growth. The efforts have been bearing fruit, with Medtronic reporting strength across businesses and geographies in the most recent quarter. The company even increased its full year revenue growth and earnings per share estimates.
Medtronic also aims to drive growth down the road by being one of the pioneers in artificial intelligence (AI) in healthcare. The company has established an "AI center of excellence" and already is using AI across its products, from the GI Genius endoscopy tool to its Minimed 780G diabetes management system.
Finally, you'll also benefit from passive income growth when you invest in Medtronic. The company aims to return at least 50% of free cash flow to investors each year and is putting the focus on dividends. Medtronic has increased its dividend payment for 46 years, which shows its commitment to rewarding investors, and it's likely to continue along this path.
Today, Medtronic shares trade for 16 times earnings estimates, which looks like a steal considering the company's leadership in its markets, the promise of its transformation plan, and passive income growth potential. So now looks like a great time to pick up shares of this monster stock -- and hold onto them for the long haul.
