Healthcare-focused investors may be disappointed to learn that the sector underperformed the broader market last year. However, they might also appreciate the fact that there are plenty of stocks in the industry that appear to be excellent buy-and-hold options.
Let’s consider three of them: Eli Lilly(NYSE: LLY), AbbVie(NYSE: ABBV), and Intuitive Surgical(NASDAQ: ISRG). Here’s why, for those looking to put $5,000 in equity markets right now, these three healthcare leaders are worth investing in and holding on to for good.
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Last year, Eli Lilly became the first healthcare company to join the trillion-dollar club. It’s not surprising to see the drugmaker reach this milestone. Eli Lilly has established itself as the leader in the fast-growing weight-loss market, which should be a massive tailwind in the medium term. The company’s tirzepatide, approved for weight management, diabetes, and obstructive sleep apnea, became the world’s best-selling compound last year. It should drive revenue growth for the foreseeable future.
Meanwhile, the pharma giant has made clinical progress that will help it dominate other corners of its core market. Orforglipron, an oral medication for diabetes and weight loss, is expected to receive approval sometime this year.
Beyond that, Eli Lilly is proving itself to be an innovative company. It has made progress in other therapeutic areas, including immunology and oncology, while doubling down on its artificial intelligence ambitions. The company is currently building a supercomputer that could accelerate the slow process of drug development.
Eli Lilly’s prospects over the next five years will largely depend on its weight-loss portfolio, but the company’s strong underlying business, excellent financial results, and innovative culture all point to it as an excellent buy-and-hold option. Investors can buy four of the company’s shares with $5,000.
AbbVie is another major pharmaceutical company with a diverse product portfolio. The company’s current key growth drivers fall within its immunology segment. They are Skyrizi and Rinvoq, two immunosuppressants approved across a range of indications. The rest of AbbVie’s lineup is pretty strong, too. It features the company’s Botox franchise, among other products. AbbVie generates steady revenue and profits, and the company masterfully overcame the loss of patent exclusivity for its former best-selling drug, Humira, in 2023.
AbbVie also has a vast pipeline and is already actively working toward overcoming the next wave of key patent expirations. The company has ample time to discover new billion-dollar products to replenish its lineup when needed.
Last but not least, AbbVie is a fantastic dividend stock. The company is part of the Dividend Kings group, corporations that have raised their payouts for at least 50 consecutive years. AbbVie’s financial results, pipeline, and dividend streak make a strong case for why it is a terrific forever stock. $5,000 is good for 23 of AbbVie’s shares at current levels.
Intuitive Surgical develops robotic-assisted surgery (RAS) systems. It is best known for the da Vinci system, the leader in its category. Intuitive Surgical generates strong revenue and earnings, while continuously expanding its installed base. The company also benefits from a competitive advantage thanks to switching costs.
The da Vinci system isn’t just an expensive piece of equipment for hospital systems. It’s also used to train surgeons, including in medical schools and residency programs. Once they have spent money purchasing it and a lot of time training medical staff on it, switching to a competing device makes little sense. This is a key reason that Intuitive Surgical should remain the leader in RAS for a long time, despite mounting competition from other healthcare giants.
The company will also benefit as its procedure volume continues to move in the right direction, an important revenue growth driver as demand for the instruments and accessories Intuitive Surgical sells increases. Procedure volume should expand as Intuitive Surgical earns more indications for its crown jewel, a trend that has been routine for some time.
Over the long run, the company will benefit from significant tailwinds, including the world’s aging population. That’s why the stock could deliver competitive returns for a long time. $5,000 can get you nine shares.
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Prosper Junior Bakiny has positions in Eli Lilly and Intuitive Surgical. The Motley Fool has positions in and recommends AbbVie and Intuitive Surgical. The Motley Fool has a disclosure policy.
