I think the stock market’s valuation has become frothy. And I’m in good company; Warren Buffett’s actions show that he shares this view. The legendary investor remains a net seller of stocks and has built up a record high cash hoard for Berkshire Hathaway. As I wrote recently, Buffett is fearful, while others are greedy.
Does this mean there are no good choices for investors right now? Not at all. Some shares are not expensively priced. Here are three simple stocks to buy before the end of 2024.
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Let’s get the bad news first BioNTech(NASDAQ:BNTX) out of the way. Sales of the COVID-19 vaccine that the biotech company developed Pfizer are no longer anywhere near where they used to be. But I don’t think their joint COVID vaccine is a major reason to buy BioNTech stock anytime soon.
Instead, I view BioNTech’s pipeline as a potential gold mine. The company is evaluating four programs in late-stage testing, two of which are cancer therapies. There are 13 candidates in Phase 2 testing. All but one target some form of cancer.
BioNTech expects to launch its first cancer immunotherapy within the next two years, and aims to obtain “10 indication approvals in oncology” by 2030. Will the biotech innovator be able to achieve these goals? Don’t know. However, the market is pricing BioNTech stock as if that were the case No chance of success.
Don’t you believe me? BioNTech’s enterprise value (which takes into account market capitalization, cash position and debt) is approximately $11 billion, according to figures. LSEG. But BioNTech should generate at least $2.6 billion in revenue this year. That equates to a price-to-sales ratio of 4.2, well below the average P/S of roughly 7.5 for the biotech industry (which includes many companies that don’t have a product on the market).
I think this valuation gap implies that BioNTech’s pipeline is considered practically worthless. But I suspect it’s worth quite a lot, and presents great opportunities for investors.
Buy Vertex Pharmaceutica(NASDAQ: VRTX) sooner or later should also be a smart move. In January 2025, Vertex hopes to receive approval from the US Food and Drug Administration (FDA) for two new products. An FDA decision on the triple combination of vanzacaftor for the treatment of cystic fibrosis (CF) is expected early this month. The agency should make a ruling on suzetrigine in the treatment of acute pain by January 30.
The vanzacaftor triple offers a more convenient dosing (once a day) than Vertex’s blockbuster Trikafta. It is also more powerful than Trikafta and has a significantly lower royalty burden. I fully expect the combination to become Vertex’s most profitable CF therapy ever.
Suzetrigine is a non-opioid pain therapy. This is extremely important, given the side effects and addictive potential of opioids. Vertex is already preparing for a rapid launch of suzetrigine, assuming it gets approval (which I think is very likely). The company is also evaluating the drug in a Phase 3 trial for the treatment of diabetic peripheral neuropathic pain, and a Phase 2 trial for the treatment of lumbosacral radiculopathy (lower back and hip pain).
Vertex’s pipeline includes two late-stage programs focused on kidney disease. Inaxaplin is a potential treatment for APOL1-mediated kidney disease, which affects more patients worldwide than CF. The company views povetacicept as a “pipeline within a product,” primarily targeting the chronic kidney disease IgA nephropathy.
Last but not least, Vertex continues its goal to cure type 1 diabetes. Islet cell therapy VX-880 is already in phase 3 testing, although its use could be limited due to the need for patients to receive immunosuppressants. But VX-264 doesn’t require immunosuppressants and isn’t far behind in phase 1/2 trials.
Meanwhile, Vertex continues to enjoy a monopoly in treating the underlying cause of CF. And the shares trade at 25 times forward earnings. I think this is a bargain considering the company’s tremendous growth prospects.
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*Stock Advisor returns December 2, 2024
Keith Speights holds positions at Berkshire Hathaway, Pfizer and Vertex Pharmaceuticals. The Motley Fool holds positions in and recommends Berkshire Hathaway, Pfizer and Vertex Pharmaceuticals. The Motley Fool recommends BioNTech. The Motley Fool has a disclosure policy.
2 No-Brainer Stocks to Buy Before the End of 2024 was originally published by The Motley Fool
