Your long-term investment portfolio should have significant exposure to health care actions. People will always seek treatments for diseases, so demand in this sector is not going to disappear anytime soon. Additionally, there is a wide variety of healthcare companies, making it an attractive sector for any type of investor.
Consider how this value stock and growth stock below could improve your portfolio.
1.Pfizer
Pfizer (NYSE:PFE) is one of the world’s leading pharmaceutical companies, but it fell out of favor with investors after a difficult few years. The drugmaker saw a massive surge in sales and profits during the height of the COVID-19 pandemic, driven by demand for vaccines and other related treatments.
Pfizer’s sales and profits subsequently fell sharply as these treatments were less sought after by the public, but the most recent quarterly results suggest that things have normalized and the company can return to modest growth.
A strong research and development pipeline is essential to a pharmaceutical company’s future success, and Pfizer has one of the strongest pipelines in the industry. It has more than 100 candidates in various stages of clinical trials, many of which show significant revenue potential.
The company has secured several significant approvals in recent years and has supplemented its internal development with a handful of significant acquisitions. Analysts expect significantly higher revenue potential by the end of the decade from these efforts.
The market seems to ignore Pfizer’s opportunities, given the stock’s valuation ratios. Its forward price-to-earnings ratio is below 13, and its enterprise value-to-EBITDA ratio is even lower. The stock is cheap relative to its current and near-term forecast earnings. Its dividend yield is around 6%, so the stock is also cheap relative to the dividends it currently pays.
These valuation metrics are surprising for a company with a clear path to growth. Pfizer too recently beat analysts‘ quarterly earnings estimates, so there is evidence that it is going through a recovery phase sooner than expected.
COVID treatments still make up a significant portion of Pfizer’s revenue, and they may struggle. Fortunately, his dependence on these products is decreasing. It is also reasonable to apply some discount to expected future cash flows from Pfizer’s pipeline products. Regulatory, clinical and competitive pressures all present potential uncertainties and challenges.
Nonetheless, this value stock pays a healthy dividend today, so there is a basis for immediate and cumulative gains, regardless of near-term stock price action. In the long term, cheap valuation ratios mean the price will appreciate if the company can capitalize on its drug pipeline.
2. CRISPR therapeutics
CRISPR therapeutics (NASDAQ:CRSP) is a disruptive biotech stock that has been turning heads recently. The company is one of the leaders in gene therapy. It is developing several products that could radically change the way serious illnesses are treated.
The company received its first regulatory approvals last year. Its first product, Casgevy, is now approved in the United States, United Kingdom, European Union, Saudi Arabia and Bahrain for the treatment of sickle cell anemia and transfusion-dependent beta thalassemia. Casgevy was developed in partnership with Vertex Pharmaceuticalswhich seems valuable for successful marketing of the product.
There are already many treatment centers around the world welcoming patients. Biotech companies also signed large contracts with private insurers and government payers, so there was agreement on pricing and a clear path to near-term revenue. It’s been an eventful few months for CRISPR.
CRISPR sits on the opposite end of the growth stock spectrum from Pfizer. The biotech company has yet to report significant revenue and burns through cash every quarter. It only has one product that is just starting to be marketed and will have to share these revenues with Vertex. Its $5 billion market capitalization is based on speculation about potential cash flows from products still in development.
The company’s recent successes should give investors confidence. However, it faces obvious risks related to product development, regulatory approval, product introduction and competition. CRISPR could greatly reward shareholders by disrupting the biotech industry, but there is still uncertainty to overcome.
Should you invest $1,000 in Pfizer right now?
Before buying Pfizer stock, consider this:
THE Motley Fool Stock Advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now…and Pfizer wasn’t one of them. The 10 selected stocks could produce monster returns in the years to come.
Consider when Nvidia made this list on April 15, 2005…if you had invested $1,000 at the time of our recommendation, you would have $550,688!*
Equity Advisor provides investors with an easy-to-follow plan for success, including portfolio building advice, regular analyst updates, and two new stock picks each month. THE Equity Advisor the service has more than quadrupled the return of the S&P 500 since 2002*.
*Stock Advisor returns May 13, 2024
Ryan Downie has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends CRISPR Therapeutics, Pfizer and Vertex Pharmaceuticals. The Mad Motley has a disclosure policy.
2 Healthcare Stocks to Buy and Hold for Great Long-Term Potential was originally published by The Motley Fool
