The conventional wisdom is that there are two key aspects of timing in investing: when to buy a stock and when to sell it. But are there stocks that allow you to eliminate the selling part?
Three Motley Fool contributors think the answer to this question is a resounding yes. Here’s why they see it this way AbbVie (NYSE: ABBV), Eli Lilly (NYSE: LLY)And Vertex Pharmaceuticals (NASDAQ: VRTX) like healthcare stocks that you can buy and hold forever.
The key to a long life
Keith Speights (AbbVie): What is the secret to longevity in business? The ability to adapt to a rapidly changing environment. If a company can adapt successfully, it will stay in business indefinitely. I think AbbVie is a master of adaptability.
Remember that in 2013 (the year it was spun off from Abbott Laboratories), AbbVie’s autoimmune disease drug, Humira, generated 57 percent of the company’s total sales. Its No. 2 product at the time, AndroGel, generated less than a tenth of the sales that Humira did.
But Humira no longer has patent exclusivity. Is AbbVie struggling with declining sales of its best-selling product? No, it isn’t. The company adapted. In the years leading up to Humira’s patent expiration, it invested heavily in research and development. And it made smart acquisitions.
Those efforts have paid off. In the second quarter of 2024, Humira accounted for just 19.5% of AbbVie’s total revenue. However, the pharmaceutical giant still generated more than 42% more revenue in the first half of this year than in all from 2013.
I have absolutely no doubt that the company will survive and thrive in the future, no matter what changes come. And it will pay shareholders handsomely along the way: AbbVie is a Dividend King with a forward dividend yield of 3.2%.
Eli Lilly is a top stock that you can buy and forget about
David Jagielski (Eli Lilly): There aren’t many stocks that I would say you can buy and hold forever, but pharmaceutical company Eli Lilly is certainly one of them. With a rich history of growth that goes back more than a century, the company has consistently found ways to grow and innovate.
The best-selling products this year will likely be Zepbound (for weight loss) and Mounjaro (diabetes), and that may not change in the near future. However, innovation will be a key part of long-term success, and Eli Lilly is well-equipped to do so.
With strong fundamentals and a broad business spanning many therapeutic areas, Lilly has many avenues to expand its business in the long term. Cancer, immunology, neurodegeneration and pain are some of the areas it is targeting in its pipeline.
Then there are the acquisitions that Lilly can pursue to bolster and accelerate its growth. It can afford to do so because it generates impressive profit margins of around 20%, which can help the company raise the cash it needs to pursue any growth opportunity it sees fit.
The blockbuster drugs the company now has could help Lilly generate revenues and profits that will pave the way for the new drugs it will bring to market. Patents don’t last forever, and so the company’s constant focus on innovation is what makes this a great stock to buy and hold.
And that culture of growth is evident at the top. CEO David Ricks, as he talks about the company’s early gains in the weight-loss market, doesn’t seem satisfied with Eli Lilly’s strong results and assets.
Instead, Ricks said in a recent interview that he wants to “exploit” the company’s lead in obesity treatment by bringing more products to market. That’s the kind of leadership and mindset that could keep Eli Lilly a top growth stock for decades.
A company with a winning vision
Prosper Junior Bakiny (Vertex Pharmaceuticals): Most businesses have a purpose or mission, something they are trying to achieve in addition to generating profit. Having a mission does not guarantee success, but it helps give the business a general direction.
Vertex Pharmaceuticals, a leading biotech company, set out to develop drugs for serious diseases, particularly those with few treatment options. The pharmaceutical company is not alone in the industry in this focus, but it is one of the best at it.
Vertex has developed and currently markets the only drugs that treat the underlying causes of a rare disease, cystic fibrosis (CF). It has maintained this monopoly for more than a decade, despite several large and successful drugmakers actively trying to challenge it.
Having a strategy means nothing without the ability to execute. Vertex has both, as evidenced by its CF-related breakthroughs. The biotech is moving beyond its core area of expertise.
The most recent launch, Casgevy, is a gene-editing treatment for two rare blood disorders. It should gain more treatments in the coming years, including a therapy for acute pain that is currently being evaluated for regulatory approval.
The pipeline contains several other promising candidates. Past performance may not guarantee future success, but in the case of Vertex, past performance is due to underlying strengths that the company still appears to exhibit.
There will be headwinds and setbacks; that’s inevitable. However, Vertex Pharmaceuticals appears poised to deliver major medical breakthroughs, strong financial performance, and excellent stock returns over the long term. It’s a fantastic stock to buy and hold forever.
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David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in AbbVie and Vertex Pharmaceuticals. Prosper Junior Bakiny has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Abbott Laboratories and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
3 Stocks to Buy and Hold Forever was originally published by The Motley Fool
