Bull Market Buys: 2 Growth Stocks to Own for the Long Haul

Innovation is paying off for both of these medical device specialists.

Every good thing must come to an end — and, eventually, the bull market we’re experiencing will, too. Long-term investors must prepare for that to happen at some point.

One of the best ways to do so is to buy stocks that can perform well through bull runs but can also hold down the fort when things aren’t going so well. That’s what it takes to deliver market-beating returns over long periods — corporations that crumble under the pressure of bear markets aren’t worth holding onto for the long haul.

Below, I’ll discuss two stocks in the healthcare field that investors can confidently buy and hold for a long time: Intuitive Surgical (ISRG -0.32%) and DexCom (DXCM 0.31%).

1. Intuitive Surgical

The need for important and potentially life-saving surgeries won’t subside anytime soon. Companies that provide the devices and instruments that help facilitate medical procedures could thrive for a long time, especially as the world’s population ages and demand for these services increases.

That puts Intuitive Surgical in an excellent position. The healthcare giant sells robotic-assisted surgery (RAS) systems, particularly the da Vinci systems, its signature device.

While it’s true that medicine can progress quickly and sometimes leave non-innovative companies behind, everything indicates that this won’t happen to Intuitive Surgical. Here are two reasons why.

First, the company has historically been highly innovative. Its da Vinci system was the first RAS device cleared by the U.S. Food and Drug Administration in 2000. Since then, the company has crafted four more generations of its crown jewel, bringing the total to five.

Second, RAS accounts for less than 5% of procedures that can be performed robotically, despite their allowing physicians to conduct minimally invasive surgeries that lead to less cutting of the skin, less bleeding, less scarring, faster recovery times, and shorter hospital stays. In a sense, the medical community is catching up with Intuitive Surgical — and the company should benefit as the adoption of RAS grows.

It’s not just about selling da Vinci systems; Intuitive Surgical typically places a few 100 of them, at most, per quarter, which medical facilities often pay in installments. Even at a price between $0.7 million and $2.5 million, that’s not the most lucrative opportunity for the company, especially since this business typically generates smaller margins. Intuitive Surgical makes more than half its revenue from the sale of instruments and accessories associated with its key device.

The more procedures, the more instruments needed, and the more money it makes. Intuitive Surgical has delivered strong results and stock market performances for a long time. This should continue for many more years.

2. DexCom

DexCom is looking at a vast long-term opportunity. The company develops continuous glucose monitoring (CGM) systems for diabetes patients.

Diabetes is a worldwide epidemic that has been getting worse for decades, and researchers say things will continue to get worse. CGM devices, which give diabetics a much easier and more convenient method of tracking their blood glucose levels, have been associated with better health outcomes for this population.

DexCom is one of the leaders in the CGM market with its suite of products, which include the G6, the G7, and the DexCom ONE. The company has generally been innovative, progressively developing newer and better options.

The adoption of the technology is ramping up. That’s why DexCom’s revenue and earnings have been moving in the right direction for quite a while. Is there more room to grow? Yes. Even among current diabetics, the adoption of the technology, especially in second- and third-world countries, is very low.

DexCom’s main competitor, Abbott Laboratories, recently reported that of the half-a-billion adults with diabetes in the world, only 1% use CGM devices. That’s a massive worldwide opportunity, especially as DexCom enters new territories.

The medical device specialist finally got into the Latin American market last year through Argentina. Even in first-world countries like the U.S., there’s some white space among those patients who benefit from third-party coverage.

Here’s the bottom line: DexCom is an innovative monster with plenty of room to grow in a market where it’s one of the leaders. The stock can deliver outsized returns to long-term investors.

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