3 Beaten-Down Stocks to Hold for the Next 10 Years
Many investors are looking to capitalize on nascent markets, such as air taxis and robotaxis, hoping that investing in industry leaders will yield superior returns as these markets mature over the next decade. That makes sense. However, this strategy comes with significant risks. It’s incredibly hard to predict how new markets will evolve, and many of the corporations in these corners will likely end up being wealth destroyers.
Investing in companies in well-established sectors is far less risky. That said, let’s discuss three stocks to consider in the large and growing healthcare industry: Pfizer (PFE +0.45%), Intuitive Surgical (ISRG +1.61%), and HCA Healthcare (HCA +1.92%). All three have faced challenges of late, but they could bounce back and reward patient investors in the long run.
Image source: The Motley Fool.
1. Pfizer
Some of the new products Pfizer has launched in recent years have not had a meaningful impact on its financial results, which have been unimpressive since the heights they reached during the pandemic years. However, the drugmaker now boasts several highly promising pipeline candidates that could meaningfully boost sales and earnings, and help it overcome upcoming patent cliffs.
In the weight-loss market, Pfizer is developing an oral anti-obesity option, as well as a long-acting medicine that could be administered monthly, whereas the current leaders are administered weekly. These are differentiated products which, if approved, could carve out a solid niche in this large and fast-growing market.
Today’s Change
(0.45%) $0.12
Current Price
$25.53
Key Data Points
Market Cap
Day’s Range
$25.30 – $25.67
52wk Range
$23.58 – $28.75
Volume
24.6M
Avg Vol
41.9M
Gross Margin
65.16%
Dividend Yield
6.77%
In oncology, Pfizer is developing products such as atirmociclib, which has shown potential in clinical trials to be more effective than some approved therapies in treating certain breast cancers. Pfizer’s PF’4404 is another promising candidate being developed across multiple oncology indications.
The drugmaker has many more beyond these two areas. In the next three years, the company should make significant clinical and regulatory progress and, eventually, build a stronger approved portfolio capable of driving decent revenue and earnings growth well into the 2030s. Pfizer has lost significant value in recent years, but the stock is a buy on the dip.
2. Intuitive Surgical
Intuitive Surgical is facing multiple problems that are putting pressure on its margins, including the launch of its latest device, the da Vinci 5. However, the company’s dominance in the robotic-assisted surgery (RAS) market means that procedure volume, revenue, and earnings continue growing at a good clip.
In the second quarter, Intuitive Surgical’s revenue climbed to $2.89 billion, 19% higher than the year-ago period, driven by a 15% year-over-year growth in da Vinci procedures. Adjusted earnings per share came in at $2.80, almost 28% higher than the prior-year quarter. Some worry the da Vinci 5’s lower margins will be a problem in the long term.
Today’s Change
(1.61%) $5.93
Current Price
$374.19
Key Data Points
Market Cap
Day’s Range
$369.48 – $376.63
52wk Range
$328.57 – $603.88
Volume
2.3M
Avg Vol
3M
Gross Margin
66.66%
However, my view is that the device’s better features compared to its predecessors will expand Intuitive Surgical’s addressable market, including on the regulatory front. Intuitive Surgical may earn indications it previously didn’t have for the da Vinci system, leading to increased procedure volume and stronger revenue from instruments and accessories.
Meanwhile, even as it faces growing competition from other healthcare giants, Intuitive Surgical benefits from a wide moat, driven by switching costs and the massive data on real-world procedures it has amassed over the years, enabling it to improve its devices over time. These advantages should allow Intuitive Surgical to bounce back and make significant headway in the underpenetrated RAS market over the next 10 years.
3. HCA Healthcare
HCA Healthcare’s financial results have been disappointing this year. The company is dealing with a higher mix of uninsured patients, resulting in higher expenses and lower margins. HCA Healthcare likely won’t solve this problem in the near term. So, the next year should remain fairly volatile.
However, the company can address this issue, notably by negotiating better terms with commercial insurers (which pay higher reimbursement rates than government payers). HCA Healthcare has dealt with similar issues before and usually comes out on top.
Today’s Change
(1.92%) $7.71
Current Price
$408.44
Key Data Points
Market Cap
Day’s Range
$399.75 – $411.45
52wk Range
$353.99 – $556.52
Volume
607.6K
Avg Vol
1.7M
Gross Margin
15.48%
Dividend Yield
0.75%
In fact, HCA Healthcare has shown its ability to manage headwinds better than most of its competitors. That’s why it has generally increased its market share. The company could do the same through 2036 by capitalizing on key secular tailwinds. Improved medical care and declining birth rates in the U.S. mean that the population is aging, and older people need more of the services HCA Healthcare offers.
That puts the company in a strong position within an industry with significant regulatory barriers to entry, where it has already built strong relationships with physicians, patients, and third-party payers. In short, HCA Healthcare might not stay down too long. Investors should consider buying the dip before a rebound.
