Many investors are concerned about a resurgence of market turbulence and what that could mean for stocks in the weeks and months ahead. But great companies can stand the test of time and deliver meaningful portfolio returns. Concerns about the U.S. economy, its impact on the global economy, and the trickle-down impact of inflation on companies across all sectors are valid.
At the same time, if you’re investing your money in great companies and plan to hold your positions for years, these short-term moves don’t have to distract you from your overarching financial goals. On that note, here are two monster growth stocks to add to your portfolio now.
1. AbbVie
AbbVie (NYSE: ABBV) has faced some short-term headwinds in recent quarters due to the loss of patent exclusivity on Humira, a drug that was once the world’s best-selling medication and the crown jewel of the healthcare company’s portfolio.
While the entry of generics into the market has certainly caused a decline in Humira sales, AbbVie has other winners in its portfolio that are slowly but surely offsetting the outcome of these changes. Keep in mind that pharmaceutical companies are typically much less cyclical than other businesses. However, they do experience changing business cycles as new drugs are developed and approved, and older, best-selling drugs give way to competition.
The average period of patient exclusivity for newly approved drugs is about 12 years, but this can vary based on the specific product in question. AbbVie delayed the patent expiration of Humira for years, eventually extending the patent exclusivity period to about two decades before it was finally forced to contend with the impact of biosimilars.
Fast-forward to the second quarter of 2024, and the impact of AbbVie’s broad portfolio of other blockbuster drugs is taking hold despite slowing Humira sales, driving up revenue and earnings. Global net sales in the three-month period were $14.5 billion, up about 4% from a year ago, a healthy increase for a company at its maturity level.
This performance was driven by robust growth in the oncology and neuroscience drug portfolios of 11% and 15% respectively. Blockbuster immunology drugs such as Skryizi and Rinvoq, which saw revenue growth of 45% and 56% respectively in the quarter versus the same period last year, were also heavyweights here.
The company is highly profitable. In the first half of 2024, AbbVie generated net income of approximately $2.8 billion, up 21% from the first half of 2023. And over the past 12 months, AbbVie generated operating cash flow of approximately $19 billion, with free cash flow in the neighborhood of $20 billion.
As a long-standing dividend payer, AbbVie has increased its dividend by more than 285% since the spin-off Abbott Laboratories more than a decade ago. It currently has an annual dividend yield of about 3.1%, about double the average stock that was S&P 500with a forward annual dividend rate of $6.20 per share.
If you’re looking for a top-notch income-generating healthcare stock to add to your portfolio, AbbVie may be worth a second, serious look.
2. Cava group
Cava Group (NYSE: CAVA) owns and operates a chain of Mediterranean-style fast food restaurants in the U.S. The stock has been doing exceptionally well recently, with a staggering 200% increase since January.
The company only went public in June 2023, but its fast-growing, already profitable business seems to be attracting more and more interest from investors. Now it’s important to look beyond the share price surge and into the underlying business to see what’s happening.
In the second quarter of 2024, Cava’s revenue increased 35% year-over-year to $231 million. The restaurant company also opened 18 net new restaurants in the three-month period, resulting in Cava ending the quarter with 22% more restaurants in its portfolio than the same period last year.
Comparable restaurant revenue increased more than 14% compared to the same quarter a year ago, while restaurant-level profit increased 37% compared to the same period in 2023. About 36% of Cava’s orders in the quarter came from digital sales.
From a profitability perspective, Cava reported net income of just under $20 million in the three-month period. That was about 3x higher than net income just a year ago. The company is also cash flow positive. Net cash from operating activities was about $49 million in the second quarter of 2024, while free cash flow was about $23 million.
Cava Group, like other members of the restaurant industry, will experience some level of cyclicality and vulnerability to changing consumer spending patterns. However, the company’s fast-casual dining experience could offer a more affordable and accessible (not to mention slightly healthier) option to consumers, which could be particularly appealing if budgets are tight.
If you have a well-diversified portfolio and the risk appetite to invest in restaurant stocks, Cava looks like a good choice to capitalize on the growth in the fast-casual segment.
Should You Invest $1,000 in AbbVie Now?
Before you buy AbbVie stock, you should consider the following:
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Rachel Warren has positions in AbbVie. The Motley Fool has positions in and recommends Abbott Laboratories. The Motley Fool recommends Cava Group. The Motley Fool has a disclosure policy.
2 Monster Stocks to Buy Now Before They Go Higher was originally published by The Motley Fool
