Investing in stocks is a great way for most people to grow their wealth over time. However, all stocks aren't created equal. Some are unlikely to deliver anything resembling solid returns over the long run, while others look so promising that investing in them almost seems like a no-brainer.
Let's consider two companies in the latter category: Merck (MRK 0.09%) and Intuitive Surgical (ISRG 6.65%). Find out below why these healthcare giants are sure bets for the long haul.
NYSE: MRK
Key Data Points
1. Merck
Merck is one of the largest healthcare companies in the world. It markets Keytruda, a cancer medicine that became the top-selling drug in the industry last year. Keytruda has been maintaining solid momentum for years, gaining an impressive number of approvals while growing its sales at a good clip. It has been Merck's key growth driver for a while, something that should continue until it encounters a patent cliff toward the end of the decade.
In the meantime, Merck's financial results continue to be strong, although it didn't seem that way last year because of the negative impact of the significant drop in sales of its coronavirus medicine, Lagevrio. Merck's revenue increased by just 1% year over year to $60.1 billion. Excluding Lagevrio, the company's top line grew by a much better 9%. Keytruda's sales of $25 billion were 19% higher than the year-ago period.
Merck's vaccine business is also doing pretty well, led by HPV vaccines Gardasil and Gardasil 9. Their combined sales for the year rose by 29% to $8.9 billion.
Merck has an important catalyst on the horizon. The drugmaker is awaiting approval for sotatercept, an investigational treatment for pulmonary arterial hypertension (PAH), which could come down as early as next month. Unlike other medications, sotatercept targets the underlying causes of PAH. It looks likely to become one of the heirs to Keytruda once the latter starts facing generic competition.
Sotatercept won't replace Keytruda by itself, but it will be an integral part of Merck's post-Keytruda strategy. The company's pipeline should produce other important approvals in the next few years, including that of MK-0616, a highly promising therapy for hypercholesterolemia currently in phase 3 studies.
In all, Merck's pipeline features 30 phase 3 programs and 80 phase 2 studies. Finding a full roster to replace Keytruda completely won't be easy, but the company's track record strongly suggests that it can.
Merck is also an excellent dividend stock. It has increased its payouts by 40% in the past five years and currently offers a yield of 2.41%. Whether you're seeking growth or dividends, Merck's impeccable track record and solid underlying business make it an obvious choice for long-term investors.
NASDAQ: ISRG
Key Data Points
2. Intuitive Surgical
Intuitive Surgical specializes in developing and marketing robotic-assisted surgery (RAS) devices like its best-known product, the da Vinci system. It is the undisputed leader in a very underpenetrated market that carries significant barriers to entry.
Let's start with the difficulty of making it in the RAS market. First, competitors have to spend years and a small fortune to develop a viable robotic system -- and that's just step one. The next step would be to test it and then hopefully earn regulatory clearance for it. This entire process can take a decade.
Medical device specialist Medtronic has been trying to challenge Intuitive Surgical with its own RAS system, Hugo. Though it is now in use in some countries, it has yet to earn approval where it matters most: the U.S. By contrast, Intuitive has already gone through all these steps, granting it a significant advantage.
Furthermore, there is a massive runway ahead. As Medtronic's management noted on the company's fourth-quarter earnings call, only about 5% of procedures that could be performed robotically currently are. And Intuitive Surgical continues to march forward.
Last year, Intuitive Surgical's revenue grew by 14.5% year over year to $7.1 billion. Worldwide da Vinci procedures jumped by 21% in the fourth quarter. Intuitive also ended the year with 8,606 of its da Vinci systems installed, an increase of 14% year over year.
The rise of weight-loss medicines such as Ozempic is having an impact on the company's financial results as it decreases demand for weight-loss surgeries. However, that shouldn't be a problem over the long run as bariatric procedures make up just 4% to 5% of global surgeries. Given how underpenetrated the RAS market is, this is a drop in the bucket compared to the vast opportunities available to the company.
As a result, Intuitive Surgical remains a no-brainer for growth-oriented investors focused on the long term.
