Investing in healthcare stocks can be a fantastic way to diversify your portfolio with businesses that generate steady growth in a wide range of market environments. Not all healthcare stocks are created equal, however. These companies often prove to be all-weather in the sense that they can derive meaningful growth outside of tough economic conditions.
Healthcare stocks won’t typically deliver lightning growth overnight, but these businesses can steadily augment your returns with time. On that note, if you’re looking for two healthcare stocks to buy and hold for the long haul, don’t gloss over these names when you do.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX -0.04%) has delivered a total return roughly twice that of the S&P 500 over the trailing 12 months — and stands 40% higher than where it was one year ago.
There are plenty of reasons to be optimistic about this business. Vertex continues to rake in solid profits, cash, and revenue from it flagship lineup of products while expanding its footprint in various key segments of the rare disease drug market.
The company generated nearly $10 billion in revenue last year from just four products, all of which are the only drugs approved that treat the underlying genetic cause of the inherited disorder cystic fibrosis. The company also reported about $3.6 billion in profits.
Vertex is now working on multiple stem-cell based therapies for Type 1 diabetes and the first potential functional cure for APOL1-mediated kidney disease. It’s also developing a non-opioid drug for various moderate to severe acute pain ailments, including diabetic peripheral neuropathy, a condition that impacts approximately 2 million lives in the U.S. alone. What’s more, the company is planning on seeking approval for a non-opioid pain drug, VX-548, as well as a new triple-combination cystic fibrosis therapy by mid-2024.
The newest addition to Vertex’s portfolio is Casgevy, which is a CRISPR treatment designed to be a one-time functional cure for two rare blood disorders: sickle cell disease and transfusion-dependent beta thalassemia. Vertex co-developed and will co-market the gene-editing therapy with CRISPR Therapeutics on a 60/40 split, with the larger portion attributable to Vertex in both costs and profits.
The therapy, which is expected to run at $2.2 million per treatment, is approved in multiple markets including the U.S. and the U.K. Decisions from E.U. regulators are forthcoming. There’s a lot to like about where this healthcare business is going in the years ahead, and it’s built a solid foundation to launch itself to future growth — giving investors good reason to consider taking a position.
Teladoc Health (TDOC 1.08%) is trading down by close to 40% from its position one year ago. It’s garnered the ire of investors who have less appetite for growth stocks than in past periods and has drawn concerns about the future of telehealth post-pandemic. While growth has notably slowed from pandemic heights, the company is reaching a more mature stage in its business story and it remains a major player in a considerable market.
In fact, the telehealth space is estimated to be on track to hit a valuation of more than $455 billion globally by the year 2030, according to a study by Grand View Research. There are multiple factors driving the continued adoption of telehealth solutions, including growing awareness and adoption of these technologies, the economically favorable solutions that telehealth can offer compared to in-person appointments, growing payer coverage, an aging population, and a still persistent shortage of healthcare workers.
It’s safe to say there’s room for multiple players in this space, but Teladoc is still one of the largest telehealth providers in the world. The company has had a rough few years, and many investors jumped ship after it reported a series of multibillion-dollar impairment charges to write down the value of pandemic-era acquisitions.
However, it’s important to point out that most of Teladoc’s impairment charges were paper-only losses, not operational ones. And those net losses have shrunk substantially quarter by quarter. Teladoc shrank its net loss to $0.35 per share or $57 million by the third quarter of 2023, compared to $0.45 or $74 million in the prior-year period.
Meanwhile, third-quarter revenue was up 8% year over year to $660 million, driven by 9% revenue growth in Teladoc’s Integrated Care segment and 8% revenue growth in its BetterHelp segment. Looking back over the trailing 12 months, Teladoc has raked in $2.6 billion in revenue and operating cash flow in the amount of $285 million.
It’s not been an easy time to be a Teladoc investor these last few years, as I can attest to personally. But I still believe in the growth trajectory of this business. Shares are trading at a price-to-sales ratio of a mere 1.2. If you’re looking for a healthcare stock to buy on the dip that still has a promising growth runway ahead, this may be one to add to your buy basket.
Rachel Warren has positions in Teladoc Health. The Motley Fool has positions in and recommends CRISPR Therapeutics, Teladoc Health, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.