When the stock market is very unstable, many investors flock to assets that offer a stable but gloomy growth outlook. However, there is no need to sacrifice growth for safety.
Three Fool.com contributors believe they have identified relatively safe growth stocks in the healthcare sector that you can buy and hold. Here's why they chose Amgen (NASDAQ: AMGN)Eli Lily (NYSE: lly)and Vertex Pharmaceuticals (NASDAQ: VRTX).
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David Jagielski (Amgen): Given the recent market vulnerabilities, investors should pay close attention to their valuations, particularly for growth stocks. Drugmaker Amgen may be the perfect one to stroll around right now, due to the strong combination of value, growth and dividends it offers.
The stock is a modest transaction of 14 times the estimated future revenue (based on analyst expectations). It pays dividends that brings 3.3% and has a diverse business with some promising long-term growth prospects. There are dozens of ongoing phase 3 trials spanning multiple therapeutic areas, including neuroscience, inflammation, and oncology.
One of the drugs investors are particularly careful about is maritide. This is the GLP-1 treatment for obesity that helped participants lose 20% of their body weight in the Phase 2 trial. It should be taken monthly. This could be a much more attractive option for patients than the weekly GLP-1 injections currently approved in the market.
In 2024, Amgen reported a profit of $4 billion with total revenue of $33.4 billion with a solids margin of 12%. It also generated a total of $10.4 billion in free cash flow.
Up until the year, biotech stocks have risen by more than 12%, surpassing the broader market. That's a trend that can continue in the future given its strong growth outlook and fundamentals.
Prosper Junior Bakiny (Eli Lilly): President Trump's macroeconomic policies have led to a significant drop in key indicators this year. While it may be difficult to consider “safe” inventory in this environment, some companies like Eli Lilly seem relatively safe to those who focus on long games.
Eli Lilly's revenue has been up over 20% year-on-year since mid-2023, which stands out for the pharmaceutical giant. This performance owes diabetes and weight control medication, but reducing Eli Lily to these regions is a mistake – it may be important, but it is important.
Over the past few years, drugmakers have received approval for key drugs in other sectors, driving top line growth for some time. These include Kisunla, who is Alzheimer's. Ebglyss, eczema treatment. and ulcerative colitis therapy omvoh. Plus, Eli Lily has an incredibly deep pipeline.
Yes, again, the company's work on diabetes and anti-obesity has attracted a lot of attention. But once again, Eli Lily's business is beyond that. Although the company has entered oncology, early-stage research gene therapy for hearing loss looks promising.
Eli Lily needs to maintain strong financial results and its excellent dividend programme, even in this unstable environment. Pharmaceutical leaders have increased their payments by 200% over the past decade. Growth and income-oriented investors will find what they are looking for here, even as the broader stocks continue to decline. If anything, it's as good a time as ever to start Eli Lily's position.
Keith Speights (Vertex Pharmaceuticals): Most biotechnology strains are not safe. The exception is Vertex Pharmaceuticals. The company has ordered a virtual monopoly when treating the underlying causes of cystic fibrosis (CF). Vertex is a cash cow, which earned $11 billion in sales last year. Better yet, this big biotechnology innovator has multiple growth drivers.
One of these growth drivers lies in Vertex's core CF market. The company won Alyftrek regulatory approval in December 2024. Alyftrek is just as effective as Trikafta, the vertex top-selling CF drug, and has a once-daily dosage. Also, the apex doesn't need to pay more for new drug royalties than it does with older CF therapy.
But I'm even more bullish about the opportunity to pinnacle beyond CF. Momentum is being featured for its gene editing therapy, Casgevy. Vertex recently launched the non-opioid painkiller Journavx.
There could be even better news ongoing over the next few years. Vertex's pipeline features four programs with phase 3 clinical testing. The company wants to highlight new signs of Journavx in the treatment of painful diabetic peripheral neuropathy. There are two experimental drugs targeting kidney disease. It is inaxaprine, a kidney disease mediated through APOL1, and pobetacept, a type of IgA nephropathy. The vertex evaluates jimisul cells in late testing as a potential treatment for several types of type 1 diabetes.
Maybe some of these candidates will fail. But even if that is the case, the pinnacle is a relatively safe growth stock to buy and hold thanks to the strong growth prospects of already approved therapies.
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David Jagielski has no position in any of the stocks mentioned. Keith Speights has the position of vertex Pharmaceuticals. Prosper Junior Bakiny holds positions for Eli Lilly and Vertex Pharmaceuticals. Motley Fool has Amgen and Vertex Pharmaceuticals positions and is recommended. Motley Fools have a disclosure policy.
3 Relatively safe healthcare growth stocks you can buy and hold were originally published by The Motley Fool
