Many investors believe in the January Effect, or the idea that the stock market tends to go on a run during the first month of the year. Whether or not this effect is real, investing in a company based on it is not a good idea. Investors would be better off focusing on the performance of stocks over the long run and not just during one month.
That said, let's look at two corporations that have what it takes to deliver solid returns to patient, long-term investors: CRISPR Therapeutics (CRSP 0.95%) and Intuitive Surgical (ISRG 0.95%). Here's why these healthcare companies are worth buying this month -- or most months, for that matter -- and holding onto for a while.
NASDAQ: CRSP
Key Data Points
1. CRISPR Therapeutics
Shares of CRISPR Therapeutics are up by 26% over the past three months (as of this writing). That coincides with the company's first regulatory approval, that of Casgevy, for the treatment of sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT). These two rare blood diseases are hard to treat, but Casgevy, developed in collaboration with Vertex Pharmaceuticals, is a one-time cure. Casgevy's approval in the U.S. and several other countries is a significant step forward for CRISPR Therapeutics.
The company can now brag that its gene-editing platform, arguably so far unproven, can lead to breakthrough therapies. And thanks to Casgevy's enormous potential, CRISPR Therapeutics should start to generate the funds necessary to advance its most promising programs. What is Casgevy's total addressable market? It's hard to come up with a definitive figure, but a lower bound of $70 billion seems fair. CRISPR Therapeutics and Vertex plan to initially target 32,000 patients in the U.S. and Europe.
That total doesn't include some countries in the Middle East, where Casgevy is also seeking approval. At a price of $2.2 million in the U.S., that rounds up to $70.4 billion. The partners will also seek label expansions that would substantially expand their potential patient populations. Capturing this market -- or a portion thereof -- won't happen overnight, nor should investors expect CRISPR Therapeutics and Vertex to grab 100% of it.
Gene-editing therapies take even longer to ramp up than everyday oral drugs since they are complex to administer. Still, things are looking good for CRISPR's future. The company is going after challenging targets, from several forms of cancer to type 1 diabetes and Duchenne muscular dystrophy (a rare, progressive disease that weakens patients' muscles). CRISPR Therapeutics should have strong sales of Casgevy within the next couple of years and record meaningful clinical progress.
CRISPR Therapeutics' market capitalization is currently $5 billion -- its growth story has just started. In my view, this company is well-positioned to become a leader in the biotech industry in time, which makes it an excellent stock to buy and hold.
NASDAQ: ISRG
Key Data Points
2. Intuitive Surgical
Thanks to its da Vinci surgical system, Intuitive Surgical is the leader in the robotic-assisted surgery (RAS) market. Over the past few years, the company dealt with significant disruptions to its business caused by the pandemic. However, Intuitive still performed pretty well, and its financial results remain relatively strong. In the fourth quarter, Intuitive Surgical's revenue increased 17% year over year to $1.93 billion.
The number of procedures performed with its crown jewel jumped 21% compared to the year-ago period, while it ended the year with an installed base of 8,606 da Vinci systems, a 14% year-over-year increase. The company's adjusted earnings per share jumped 30% to $1.60. Those are strong results.
However, Intuitive Surgical is now facing an additional risk. The increasing popularity of diabetes and weight-loss medicines such as Ozempic and Zepbound could reduce demand for certain surgeries. The company is already seeing an impact. Management mentioned some deceleration in procedure growth due to these drugs in the fourth quarter.
However, that shouldn't matter a whole lot to long-term investors. For one, the bariatric (weight-loss) procedures whose demand is impacted by these medicines represent 4% to 5% of total global procedures. And Intuitive Surgical continues to gain market share in this area. Further, only 5% of procedures eligible to be performed robotically currently are, which means there is a massive runway for growth for other kinds of surgeries.
Intuitive Surgical also boasts a solid competitive advantage. Its da Vinci system costs between $0.7 million and $2.5 million. It also takes time to train physicians to use it. After making such a massive investment, hospital systems won't want to get rid of their da Vinci system, which grants Intuitive Surgical high switching costs.
That, together with its massive growth opportunities, should allow Intuitive Surgical to deliver outsized returns over the long run.
