Stocks tend to perform well in January, but that's not a good reason to invest this month. Big returns don't come in just 30 days. Rather, as long-term investors know, the important thing is to continue owning high-quality companies that can perform well over the long term. There are many candidates on the market that provide that effect. Consider two in the healthcare space: DexCom. (NASDAQ:DXCM) and exact science (NASDAQ:EXAS). Let's consider why these two companies are worth investing in now.
DexCom is a leader in the continuous glucose monitoring (CGM) market, a device that helps diabetics track their blood sugar levels. The company faced several challenges in 2024, including slower-than-expected revenue growth due to patient rebate eligibility issues. Dexcom's stock price fell off a cliff after the company announced its second quarter results. Although there has been a slight recovery, it is still significantly lower than pre-August levels.
Considering DexCom's long-term outlook, it's a good time to invest in the stock. The introduction of CGM devices has so far provided a tailwind for the company, leading to significant revenue and profit growth. These gadgets have significant advantages over blood glucose meters. For example, a CGM can automatically measure a patient's blood sugar levels up to every five minutes, allowing patients to make better health decisions every day.
BGM is manually operated and only collects the patient's blood glucose level at a given point in time. It's no wonder, then, that CGM is associated with improved health outcomes. Additionally, DexCom still has a lot of white space in the industry. Even in the United States, where CGMs are more prevalent than in most other countries, the number of patients using them lags behind the total insured population. DexCom estimates the total addressable market in the U.S. to be 25 million people, which is only a fraction of the world's diabetic population.
It's also worth pointing out that DexCom is expanding beyond treating people with diabetes. In 2024, the company launched Stelo, an over-the-counter CGM option available to pre-diabetics. Finally, DexCom's devices are compatible with third-party insulin pens, pumps, and more, giving the company a network effect. Add to this a vast runway for future growth, and DexCom should be able to bounce back from the recent downturn and deliver excellent returns for investors who stick with this path.
Therefore, stocks are a buy this month.
Exact Sciences develops innovative cancer diagnostic tests. The company's most popular brand is Cologuard, an at-home, non-invasive test for colorectal cancer, the second leading cause of cancer death in the world. However, colorectal disease is highly treatable if detected early, indicating that not enough patients are eligible for testing. Health experts recommend regular check-ups for people over 45. That is Exact Sciences' target market.
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