You probably know the old saying, “April showers bring May flowers.” And you probably know the point of the question: “What do May flowers bring?” (The answer: pilgrims.)
But what does June bring? Three Motley Fool contributors think the new month should herald great investing opportunities. This is why they chose AbVie (NYSE: ABBV), AstraZeneca (NASDAQ: AZN)And Vertex Pharmaceutica (NASDAQ: VRTX) as a no-brainer stock to buy in June.
AbbVie is a stock that covers all the bases
Keith Speights (AbbVie): Some stocks are only attractive to income investors. Others are attractive only to value investors. In many cases, stocks in both categories offer bleak growth prospects. AbbVie is an exception that covers all the bases.
Do you want income? AbbVie is a Dividend King with 52 consecutive years of dividend increases. Since the split from Abbot 11 years ago, the drug manufacturer increased its dividend payout by a whopping 269%. The forward dividend yield is just a hair under 4%.
While many stocks are trading at a premium in the roaring bull market, AbbVie looks relatively cheap. The shares trade at less than 13.9 times forward earnings.
Growth may seem like AbbVie’s Achilles heel. Declining sales of Humira, the company’s top-selling drug, which now faces biosimilar competition in the U.S. and Europe, continues to weigh heavily on AbbVie’s overall sales and profits.
However, there is light at the end of the tunnel. Thanks to rising sales of newer drugs, including Skyrizi, Rinvoq and Vraylar, AbbVie expects to quickly return to robust high-single-digit growth through the end of this decade.
AstraZeneca could look like a bargain in a few years
David Jagielski (AstraZeneca): A top healthcare stock to buy this month is AstraZeneca. The British-based pharmaceutical giant fits perfectly into any type of portfolio. It pays a dividend of approximately 2%, its activities are broad and diverse and the company sees plenty of growth opportunities in the future.
By the end of the decade, AstraZeneca expects to reach $80 billion in sales as it expands its pipeline and launches new products. The project expects to develop as many as twenty new drugs in the next six years. That’s significant growth for the company; in 2023, AstraZeneca’s sales were just under $46 billion. And investors can expect profits to improve significantly as well, as the company’s net profit margin was 13% of sales last year.
That means this already cheap stock could look like an even bigger bargain down the line. The stock trades at 18 times forward earnings and its valuation is attractive compared to the average healthcare stock, which trades at a forward earnings multiple of 20. And when we factor in long-term growth, AstraZeneca stock looks even better cheaper. trading at a price-to-earnings-to-growth (PEG) multiple of approximately one.
Whether you’re buying AstraZeneca for its dividend or impressive growth prospects, the stock is a no-brainer buy right now.
Innovation at Vertex is paying off
Prosper Junior Bakiny (Vertex Pharmaceuticals): The case for investing in Vertex Pharmaceuticals could touch many aspects of the company’s business. There’s Vertex’s cystic fibrosis (CF) franchise, an area in which it has a monopoly. Vertex’s CF therapies have consistently delivered strong sales and revenue growth.
There is more where that comes from, as in the countries where biotechnology does business, there is still a significant subgroup of this population that has not yet been treated.
We can also mention Vertex’s brand new approval, that of Casgevy, the first CRISPR-based gene editing drug to be greenlit. Casgevy deals with a few blood-related diseases and seems destined to be a blockbuster. Vertex Pharmaceuticals also has several promising late-stage programs and recent positive Phase 3 data readouts. Those are all great things to mention when discussing Vertex’s prospects.
The common thread between them, however, is Vertex’s innovative prowess, and that’s the real reason why the biotech is a no-brainer buy. Vertex Pharmaceuticals has repeatedly demonstrated its potential in developing new therapies, especially in areas of unmet need. Now that a culture of innovation has emerged, the benefits for Vertex could be formidable.
So while it’s true that the company’s current lineup and pipeline look incredibly strong, Vertex’s portfolio could look different in five years. What should remain the same is the company’s relentless pursuit of newer and better products, and its uncanny ability to succeed in enough of those pursuits to deliver strong results and consistent stock performance. That is why the share is purchased in June.
Should You Invest $1,000 in AbbVie Now?
Consider the following before buying shares in AbbVie:
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David Jagielski has no position in the stocks mentioned. Keith Speights holds positions at AbbVie and Vertex Pharmaceuticals. Prosper Junior Bakiny holds positions at Vertex Pharmaceuticals. The Motley Fool holds positions in and recommends Abbott Laboratories and Vertex Pharmaceuticals. The Motley Fool recommends AstraZeneca Plc. The Motley Fool has a disclosure policy.
3 No-Brainer Stocks to Buy in June was originally published by The Motley Fool
