Time in the market beats timing the market, hands-down. But how long should you own a stock?
Famed investor Warren Buffett perhaps said it best: "When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever."
Three Motley Fool contributors think they've spotted magnificent pharmaceutical stocks that you can buy and hold forever. Here's why they chose AstraZeneca (AZN +0.00%), Regeneron Pharmaceuticals (REGN 0.21%), and Vertex Pharmaceuticals (VRTX 0.58%).
AstraZeneca is an underrated growth stock
David Jagielski (AstraZeneca): AstraZeneca doesn't get nearly the attention it deserves. The healthcare giant is worth more than $200 billion, pays a dividend that yields 2.2%, and has a robust portfolio of products. But over the past 12 months, the stock hasn't been a big winner.
NASDAQ: AZN
Key Data Points
For opportunistic investors, now may be an optimal time to load up on this big drugmaker. The stock trades at a relatively modest 16 times its estimated future profits. Investors are getting a great bang for their buck at that price.
AstraZeneca reported revenue of $33.8 billion for the first nine months of 2023. Its growth rate may look puny at just 2%. However, when factoring out COVID-19 revenue and exchange rates, the company's sales actually increased 15% year over year. AstraZeneca also has multiple segments that have generated double-digit growth at constant exchange rates, including oncology (up 20%); cardiovascular, renal, and metabolism (up 18%); and rare diseases (up 12%).
The company's broad mix of segments and products makes AstraZeneca an ideal stock to hang on to for the long haul because it can pursue many different growth opportunities. And that's exactly what the drugmaker is doing: AstraZeneca currently has 167 programs in its pipeline.
For long-term investors, AstraZeneca provides a good mix of dividends, growth, diversification, and value. While it may not get as much attention as other high-profile healthcare stocks, I think it's a great pick.
A perpetual market-beater to buy and hold
Prosper Junior Bakiny (Regeneron Pharmaceuticals): When it comes to delivering excellent returns over the long run, biotech giant Regeneron has a solid track record. Its performance over the past few decades generally beats the market handily. Of course, that's no guarantee of future success, but Regeneron's history points to a solid underlying business and strong innovative capabilities in developing new medicines. Those qualities should allow the company to continue rewarding its shareholders for a long time.
NASDAQ: REGN
Key Data Points
In the mid-term, the biotech will count on its two key growth drivers, eczema treatment Dupixent and Eylea, which treats an eye disease. Though Eylea's patent protection runs out somewhere between 2025 and 2028, Regeneron earned approval for a high-dose formulation of the medicine last year that should be safe from this threat, at least for a while. Beyond that, the company still has a potentially rich and exciting pipeline that should yield key approvals and eventually replace its current crown jewels.
Regeneron's late-stage pipeline features 11 programs, including some brand-new ones. Elsewhere, the biotech is dipping its toes in the highly promising gene-editing field through a collaboration with an expert in this area, Intellia Therapeutics. Regeneron is going after many challenging targets with almost four dozen clinical programs in its pipeline. New approvals for key products are likely before Eylea and Dupixent lose their impact on Regeneron's revenue growth.
Even more regulatory approvals could be on the way. This should enable Regeneron to continue its longtime market-beating performance. All of this makes it a great candidate for investors in the market for forever stocks.
A bright future for this big biotech
Keith Speights (Vertex Pharmaceuticals): The future for Vertex Pharmaceuticals looks so bright that its shareholders might need to wear shades. Am I exaggerating? I'll let you be the judge.
NASDAQ: VRTX
Key Data Points
It's important to first understand that Vertex enjoys a monopoly in treating the underlying cause of cystic fibrosis (CF). The company's closest rival is at best several years away from potentially launching a product.
In the meantime, Vertex hopes to further solidify its market dominance. The big biotech appears to be on track to file for regulatory approval this year for its vanzacaftor triple-drug combo. If approved (which seems likely), I expect the therapy to become Vertex's biggest moneymaker in treating CF so far.
The company now has a new potential blockbuster on its hands. Vertex and its partner, CRISPR Therapeutics, recently won U.S. and U.K. approvals for Casgevy in treating (and effectively curing) rare blood disorders sickle cell disease and transfusion-dependent beta-thalassemia.
Another new non-CF drug could also be on the way soon. Vertex expects to announce late-stage results for VX-548 in treating acute pain in early 2024. Previous clinical data for the drug looked highly promising. Because VX-548 doesn't have the side effects and addictive characteristics of opioid drugs, it could be a huge commercial success story for Vertex.
I think Vertex could have another CF-like opportunity with inaxaplin. The drug is currently being evaluated in a pivotal study targeting APOL1-mediated kidney disease (AMKD), which affects more patients globally than CF. There aren't any therapies approved for treating the underlying cause of AMKD; inaxaplin could become the first if all goes well.
My hunch is that you've already been convinced that Vertex has a bright future. If not, consider that the drugmaker also has programs in clinical testing that hold the potential to not just treat but cure type 1 diabetes.
What's my bottom-line take on Vertex? Bring out the shades.
