Famed investor Warren Buffett once said he aimed to be greedy when others were fearful. Here's one way to apply this bit of advice when investing in stocks: Equities that look beaten-down can be great investments, provided there are good reasons to think they can bounce back.
Now that we're officially in a bull market -- with the S&P 500 recently hitting a brand-new high -- it might be a great idea to pick up shares of underappreciated stocks from the discount bin before they soar. Let's look at two great examples in the healthcare industry: Teladoc Health (TDOC -2.40%) and Pfizer (PFE 0.55%).
1. Teladoc Health
Teladoc is a leading telemedicine provider, but the company hasn't been in the good graces of investors over the past two years. There are several reasons; let's mention two of them. First, Teladoc's revenue and number of visits soared during the pandemic's early days, but have cooled down substantially since. Second, Teladoc's bottom-line numbers have disappointed -- the company remains unprofitable.
Despite these issues, there is still hope for Teladoc. One major reason to still buy the stock is that telemedicine is likely here to stay. Various polls over the past three years have revealed that customers are mostly satisfied with having this option. One survey conducted by an insurance company found that though 27% of respondents claimed to have a negative opinion of telemedicine before trying it, more than 90% of them were satisfied with the service and said they would recommend it to a friend after experiencing it.
The growing popularity of this healthcare option is an excellent sign for Teladoc. The company ended the third quarter with 90.2 million integrated care members, an increase of 10% year over year. Meanwhile, the company's chronic care unit and BetterHelp therapy service also grew their memberships. Teladoc is arguably building a network effect, as more patients in its ecosystem attract more healthcare providers and vice versa.
Furthermore, the company is making progress on the bottom line. It turned a net loss per share of $0.45 in the third quarter of 2022 into a net loss of $0.35. And its revenue and membership numbers are much higher than they were five years ago -- but (promising for prospective investors) Teladoc's share price is lower.
Teladoc's forward price-to-sales ratio currently tops 1.2, when anything under 2 is generally considered good. In my view, Teladoc is an excellent stock to buy at current levels, at least for those investors willing to hold the stock for a little while. The company may not recover immediately, but it still has a bright future.
2. Pfizer
Pfizer made a fortune thanks to its fantastic entries in the market for coronavirus vaccines (Comirnaty) and medicines (Paxlovid). It became the first pharmaceutical company to hit more than $100 billion in annual sales, an impressive achievement. However, revenue from the drugmaker's COVID-19 portfolio dropped off a cliff last year, leading to a catastrophic stock-market performance.
But there's hope for Pfizer. Last year, the company had an amazing string of regulatory approvals, hitting seven in the calendar year, more than twice the total of any other company in the industry. These new products will rise in prominence and help replace the gaping hole left by Paxlovid and Comirnaty in Pfizer's financial results.
And thanks to key acquisitions -- like the $43 billion buyout of cancer specialist Seagen -- Pfizer's innovative wheel will continue spinning. The company's pipeline features 83 programs, including 23 in phase 3 studies and four in the registration stage. This means that revenue and earnings will bounce back eventually, which makes the stock worth buying at current levels.
Pfizer's current forward price-to-earnings ratio is 12.2, whereas the pharmaceutical industry's average stands at 17. Investors will also appreciate Pfizer's dividend program. The company currently offers a yield of 5.9%, while it has increased its payouts by about 62%, a decent amount, in the past decade. Investors looking for reliable blue-chip stocks to buy and hold for a while should strongly consider Pfizer.
