Santa Claus will soon be on his way delivering presents to children around the world. But could the cheerful donor also bring something for investors? So-called “Santa Claus rallies” may take place towards the end of the year.
Three Motley Fool contributors think they’ve identified great stocks that could be well positioned to benefit from a Christmas rally. This is why they chose AbVie(NYSE: ABBV), Novo Nordisk(NYSE: NVO)And Vertex Pharmaceutica(NASDAQ: VRTX).
David Jagielski(AbbVie): Heading into the end of the year, AbbVie is a growth stock that could be heading for a rally. The drugmaker has a lot of long-term potential and could be one of the better stocks to buy as the year comes to a close. The stock has had a tepid year, as shares are up just 11% (as of Monday’s close), which pales in comparison to S&P500‘s more impressive rally of 27% year to date.
Investors turned bearish on the stock after the company announced that its schizophrenia drug emraclidine failed to meet its primary endpoint in Phase 2 trials, leading to a sell-off in the stock in November.
But that could present a great opportunity to buy the stock at a discount now, especially after encouraging news was reported from another trial. Earlier this month, the company announced positive results for tavapadone, which met both primary and secondary endpoints in a Phase 3 trial for the treatment of early Parkinson’s. The company will file a new drug application next year, which could lead to another approval related to the disease. In October, regulators granted approval for Vyalev, a treatment for advanced Parkinson’s disease.
Not every drug in AbbVie’s pipeline will be a success. But this is still a solid growth stock to own, and investors seem overly bearish on a disappointing test result for emraclidine. With over 90 compounds in the pipeline, there will be good and bad results along the way.
There is good value here for investors who are willing to be patient. Trading at just 15 times next year’s estimated forward earnings (based on analyst estimates), it may only be a matter of time before AbbVie’s stock takes off again.
Prosperity Junior Bakiny(Novo Nordisk): Several factors can trigger a year-end stock market rally, including optimism about the year ahead. It’s hard to predict which companies will benefit in 2025, but Novo Nordisk is a good choice for several reasons. Let’s consider two. First, while the drugmaker performed well in the first half of the year, it has struggled since then. In the past six months, Novo Nordisk shares are down 24%.
That’s despite the company reporting strong sales and profit growth thanks to its diabetes and obesity drugs. The market probably underestimates Novo Nordisk. Second, the company could make significant clinical progress next year. Novo Nordisk has several late-stage programs in development. Perhaps it will release data for CagriSema, an experimental weight-loss drug that could generate $20 billion by 2030, according to some estimates.
Novo Nordisk could also publish results for semaglutide, the active ingredient in Wegovy and Ozempic, in the treatment of patients with Alzheimer’s disease and metabolic dysfunction-associated steatohepatitis, two areas of high unmet need. Novo Nordisk’s relatively poor performance since June and the potential catalysts it could experience in 2025 could lead to a Santa Claus rally for the stock. But even if that’s not the case, the drugmaker remains one of the better choices in the industry. Novo Nordisk is an innovative company that consistently generates strong financial results and has a deep and exciting pipeline.
Sinterklaas rally or not, the company is worth investing in in the long term.
Keith Speights (Vertex Pharmaceuticals): Shares of Vertex Pharmaceuticals plunged Thursday after the company announced the results of a Phase 2 clinical trial evaluating suzetrigine in the treatment of painful lumbosacral radiculopathy (LSR), a form of sciatica. However, I think a recovery towards the end of the year is likely.
For starters, the sell-off was overdone in my opinion. Investors were concerned that suzetrigine did not statistically outperform placebo in the phase 2 trial. Importantly, however, the non-opioid pain drug still met the study’s primary endpoint of reducing pain on the Numerical Pain Rating Scale (NPRS). Vertex plans to talk to regulators about advancing suzetrigine into late-stage testing for LSR.
It is not unusual for the placebo response to be unexpectedly high in clinical trials of painkillers. Vertex’s post hoc analyzes suggested that a different experimental design could better control this issue during Phase 3 testing.
The bigger story for Vertex is that it faces not just one but two approval decisions from the U.S. Food and Drug Administration (FDA) in the coming weeks. The FDA is scheduled to announce its decision on approving the triple drug combination vanzacaftor for the treatment of cystic fibrosis by January 2, 2025. The agency has set a PDUFA date of January 30, 2025 for its decision on suzetrigine in the treatment of acute pain. . (By the way, the drug’s late-stage results in this indication looked great, with no yellow flags.)
I expect thumbs up from the FDA for both drugs. I also predict that vanzacaftor triple and suzetrigine will be huge commercial successes for Vertex. Santa could easily spark a rally for this biotech stock.
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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 AbbVie and Vertex Pharmaceuticals. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
3 Great Stocks That Could Enjoy a Santa Claus Rally was originally published by The Motley Fool
