The stock market has taken investors on a wild ride in recent years. However, if you have been investing in stocks for many years, even several tough market cycles should not deter you from abandoning your core investing thesis about quality companies.
Even if the S&P500 has had a pretty fantastic 2024 so far, and becoming part owners of great companies is what you should focus on as a long-term investor. Here are two top stocks to consider buying now and holding for at least a decade.
1. Vertex Pharmaceuticals
Vertex Pharmaceutica (NASDAQ: VRTX) has not rested on its laurels. The continued success of its market-leading cystic fibrosis drug franchise has paved the way for a bright future as the company continues to develop an impressive line of medicines targeting a variety of rare, undertreated diseases.
In the first quarter of 2024, the company reported total profits of $1.1 billion on revenues of $2.7 billion. These two figures represented an increase of 57% and 13% respectively from the same quarter in 2023. Vertex ended the three-month period with a hefty $10 billion in cash and investments on its balance sheet.
Vertex continues to benefit from high demand for its cystic fibrosis drugs. These medications help patients live better and longer because they target the underlying genetic factors that cause cystic fibrosis. That sustained need for Vertex’s drugs, additional label expansions for younger groups of cystic fibrosis patients and a huge patient population continue to provide a wide moat for this mainstay of Vertex’s business.
Meanwhile, the company is looking forward to a new era of growth as it plans multiple new product launches before the end of the decade, each with significant blockbuster potential. The company is in the process of launching its new gene-editing therapy Casgevy, which it was developed with CRISPR therapies and that serves as a one-time functional cure for sickle cell disease and transfusion-dependent beta-thalassemia.
Vertex has just completed regulatory applications in the US and EU for its new triple combination therapy for cystic fibrosis for patients aged six years and older, which addresses 31 rare mutations that Vertex’s current line of drugs does not include.
Management also estimates that more than 6,000 patients who have stopped taking existing drugs may be interested in this new treatment option. This is just a fraction of the total addressable market for its cystic fibrosis franchise, which Vertex previously estimated at around 92,000 people in Europe, North America and Australia alone.
Suzetrigine is another potential blockbuster for Vertex, as a non-opioid drug that addresses multiple acute pain conditions. Vertex has initiated a new application for Suzetrigine with the U.S. Food and Drug Administration for moderate to severe acute pain. It is about to start the phase 3 trial where the drug is being studied as a treatment for diabetic peripheral neuropathy.
These are just a handful of the exciting updates about Vertex’s pipeline. It also just announced that it plans to make an acquisition Alpine Immunosciences, a company that makes protein-based medicines for various immune diseases. The company’s lead candidate, povetacicept, is being developed as a treatment for the underlying cause of IgA nephropathy (IgAN), which no commercialized drug currently responds to.
Vertex already comes from a position of significant strength with its market leadership in cystic fibrosis therapies underpinning a rock-solid balance sheet. Now seems like a better time than ever to pick up even a few shares of this top healthcare stock.
2. elf Beauty
elf Beauty (NYSE: ELF) has evolved significantly over the years, while the focus on affordable, high-quality cosmetics and skin care remains paramount. The company first launched twenty years ago as an online-only company.
Originally, Elf only sold a dozen products at the price of just $1 each. Today, Elf has legendary status as a hugely popular beauty brand, with both millennial and Gen Z shoppers looking for premium makeup in a wallet-friendly price range, often as a replacement for household brand names.
The company is known for its TikTok campaigns, celebrity partnerships and creative advertising initiatives that target this core consumer audience. The brand family includes the clean beauty brands elf Cosmetics and Well People, and the clean skin care brands elf SKIN, Naturium and Keys Soulcare.
At one point the company owned its own physical stores, but most importantly its strong online presence and lucrative partnerships with major retailers such as Goal, WalmartAnd Ultimate beauty. In the company’s fiscal 2023, these three retailers represented 25%, 20% and 15% of the company’s total net sales, respectively.
Accessible prices for high-quality cosmetics and skin care products are an attractive buying proposition for customers in any market environment. While the beauty industry has long been the subject of feverish consumer spending, the online beauty trend, fueled by social media, is a newer phenomenon that Elf has expertly tapped into.
In the first nine months of eleven’s fiscal 2024, which ended December 31, it generated net sales of $703 million, an increase of 80% from the same period last year. Net income for the nine-month period totaled $113 million, and Eleven ended that time frame with approximately $73 million in cash on the balance sheet.
The twelve-month operating cash flow for this company is approximately $67 million. elf also has a relatively low-asset business thanks to its long-term partnerships with third-party suppliers (a common but effective model in the beauty world).
With a robust online and physical retail network and an increasingly impressive balance sheet, Elf looks like a company to keep a close eye on. Investors with cash to spare may also want to start or increase a position in this beauty stock.
Should you invest $1,000 in Vertex Pharmaceuticals now?
Consider the following before purchasing shares in Vertex Pharmaceuticals:
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Rachel Warren has no positions in any of the stocks mentioned. The Motley Fool holds positions in and recommends CRISPR Therapeutics, Target, Ulta Beauty, Vertex Pharmaceuticals, Walmart, and elf Beauty. The Motley Fool has a disclosure policy.
2 Incredible Growth Stocks to Buy and Hold for the Next Decade was originally published by The Motley Fool
