We're almost halfway through the year, and so far, it's been a pretty solid one for equity markets. It's as good a time as any to review one's portfolio and potentially consider putting more money into stocks with the understanding that our current bull market won't last forever. So, as always, it's essential to invest in stocks that can perform well over long periods, regardless of how they may be doing right now.
For those who need a bit of inspiration on that front, let's consider two stocks in the healthcare field that have what it takes to deliver excellent returns to patient investors: Vertex Pharmaceuticals (VRTX -0.11%) and Abbott Laboratories (ABT -0.53%).
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals develops medicines, and like most companies in this business, success comes largely from innovation. That's precisely why Vertex has been an above-average performer for over a decade; the company continues to market newer and better therapies.
Vertex's strategy is to go after therapeutic areas with significant unmet needs. It's often difficult to break into these areas (if it were easy, there wouldn't be hundreds of rare diseases without approved medicines). However, that hasn't stopped Vertex from hitting home runs.
The company's cystic fibrosis (CF) franchise is a monopoly. CF is a rare genetic disorder that causes damage to various internal organs. Vertex's leadership in this field has led to consistent revenue and earnings growth. Vertex is still innovating, as evidenced by positive phase 3 data for its next-gen CF therapy it released in February.
VRTX Revenue (Annual) data by YCharts
Part of management's goal is to launch five new therapies in five years. The first of these is already on the market. It's called Casgevy, a gene-editing therapy for sickle cell disease and transfusion-dependent beta-thalassemia, two rare blood-related conditions. Vertex is expanding beyond its core franchise, which should have investors excited.
The company also reported positive results from a phase 3 clinical trial for suzetrigine, a potential therapy for acute and neuropathic pain. Vertex is working on a regulatory application for this product.
It has other key ongoing studies for several exciting candidates. Perhaps one of the most promising is its work in trying to functionally cure type 1 diabetes. It's a lofty goal, and though it is too early to get excited (despite encouraging early results), it's fair to be cautiously optimistic.
But Vertex's prospects don't depend on any single program. The company's innovative ways should lead to more breakthroughs even when some of its attempts fail. That's what makes Vertex's stock a buy this month -- in fact, I'd recommend it anytime. Vertex Pharmaceuticals is one of my highest-conviction holdings.
2. Abbott Laboratories
Abbott Laboratories is a medical device specialist with a long and impressive track record of innovation, strong financial results, and dividend increases. The company's business is somewhat diversified, too, as it boasts three other segments: established pharmaceuticals, nutrition, and diagnostics.
This diversification comes with perks. Abbott can absorb shocks to one of its segments thanks to the others. That's how it kept its revenue afloat during the pandemic, when its main medical devices unit experienced significant disruptions. Still, medical devices remain the company's main driver, from its heart failure products to its diabetes care business.
That includes Abbott's continuous glucose monitoring (CGM) franchise, the FreeStyle Libre. CGM devices help diabetes patients keep track of their blood sugar levels throughout the day. Abbott is one of the two undisputed leaders in the market. The FreeStyle Libre highlights the healthcare giant's innovative abilities.
The company recently pointed out that in terms of sales dollars, the FreeStyle Libre is the most successful medical device in history -- no small feat. Yet there might still be a vast runway ahead, particularly in developing markets where penetration remains low. Of the more than half a billion adults with diabetes worldwide, only 1% use CGM technology.
ABT Revenue (Annual) data by YCharts
Finally, Abbott is a Dividend King, with an active streak of 52 consecutive years of payout increases. That speaks volumes about the strength of the company's underlying business. The stock can still deliver outsize returns over the long run, which is why Abbott Laboratories is a buy today.
