Some stocks look so attractive that they are hard to pass up. These are often market leaders with robust underlying businesses, competitive advantages and high growth potential. That describes New Nordisk (NYSE: NVO) And HCA Healthcare (NYSE: HCA) Well, these two healthcare leaders have generally delivered above-average returns, but they still have plenty left in the tank.
For those of you who have $1,000 to spare that isn’t earmarked for emergencies, here’s why it might be a good idea to put that money into these two companies.
1. New Nordisk
Novo Nordisk, a long-time leader in the pharmaceutical industry, has become even more well-known in recent years. This is due to the Denmark-based pharmaceutical company’s work in obesity care. Novo Nordisk’s Wegovy, a weight-loss therapy, is one of the leaders in this fast-growing market. Ozempic, another well-known brand that shares Wegovy’s active ingredient (semaglutide), is a top-selling diabetes drug. The two help Novo Nordisk achieve excellent financial results.
In the first half of the year, the company’s net sales rose 24% year-on-year to 133.4 billion Danish kroner ($19.6 billion), a strong performance for a pharmaceutical giant. Despite the strong results and clinical progress, Novo Nordisk has faced some challenges. For example, the company failed to get approval for a once-weekly insulin drug in the U.S., partly due to manufacturing issues, even though it was already approved in the European Union, China and Japan (where it is called Awiqli).
Still, occasional regulatory hurdles aren’t that big a deal for a company this successful. Novo Nordisk is getting approvals elsewhere. Wegovy got a label extension in March to reduce the risk of several cardiovascular events in people with diabetes or obesity. It’s likely to get many more green lights.
Furthermore, Novo Nordisk should have many more growth engines than Ozempic and Wegovy. The company should remain a leader in developing anti-obesity treatments — even with many of its competitors looking to eat its lunch. Novo Nordisk has more experience than any of its competitors in developing drugs in this area, which gives it a bit of a competitive edge. Its pipeline is full of such drugs.
By some estimates, Novo Nordisk’s Cagrisema, one of the most promising research therapies in the field, could generate as much as $20.2 billion in revenue by 2030. Novo Nordisk has many more candidates in the pipeline than just its core areas of diabetes and obesity. The real reason to buy the company lies in its innovative quality and proven ability to perform well over long periods of time.
The shares are trading for just under $135, so investors can buy seven for $1,000.
2. HCA care
Over the past five years, HCA Healthcare has shown resilience. That’s perhaps to be expected from a hospital chain, one of the leading in the U.S. After all, HCA Healthcare provides services—facilities that help care for the sick—that will always be in demand. But there’s more to it than that. HCA Healthcare has had to deal with pandemic-related disruptions to its business, including fluctuations in admissions and occupancy rates, which are important to its ability to generate revenue. HCA Healthcare has then had to deal with economic challenges, higher labor costs and more.
It did all this while still growing its market share from 26.5% at the end of 2019 to 28% a year and a half later. HCA Healthcare has continued to expand its position since then, management says. In other words, it has weathered these tough years better than most of its competitors offering similar services. And its financials remain quite strong. In the second quarter, HCA Healthcare’s revenue rose a respectable 10% year-over-year to $17.5 billion from $17.5 billion, and the company’s earnings per share rose 29% to $5.53.
HCA Healthcare will continue to experience challenges, as all companies do from time to time, but the long-term outlook is bright. Breaking into the field is incredibly capital-intensive — building dozens of facilities is expensive. Winning the business and trust of doctors, patients, and third parties is also no easy feat. That’s why HCA Healthcare has a significant advantage over new entrants.
And even compared to other established competitors, its increased market share figures, dating back to at least 2011 (when it had a 23% share), show it has the qualities required to remain competitive in a sector with long-term potential due to demographic changes such as the ageing of the global population.
At the time of writing, HCA Healthcare shares are worth $367 each, so $1,000 is good for two of them.
Should You Invest $1,000 in Novo Nordisk Now?
Before you buy Novo Nordisk stock, you should consider the following:
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends HCA Healthcare. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
2 No-Brainer Healthcare Stocks to Buy with $1,000 was originally published by The Motley Fool
