Voice News

CA News 2024


3 no-brainer stocks to buy in May

These great stocks are a great choice for investors as spring comes to an end.

Don’t believe the adage, “Sell in May and get out.” Buying stocks can still be a smart move, especially if you’re a long-term investor.

Three Motley Fool contributors have identified stocks they don’t think are a good idea to buy in May. This is why they chose Eli Lilly (LLY -2.77%), Pfizer (PFE 0.40%)And Vertex Pharmaceutica (VRTX 0.23%).

It’s always a good time to buy this stock

Prosper Junior Bakiny (Eli Lilly): What makes a stock a no-brainer? Excellent financial results, a competitive advantage or a long road to growth? The answer is all these things and more. And Eli Lilly, one of the largest healthcare companies in the world, excels in all three categories. In the first quarter, the company’s revenue grew 26% year over year to $8.8 billion, a fantastic achievement for a pharmaceutical giant.

Ultimately, the drugmaker’s adjusted earnings per share (EPS) came in at $2.58, up 59% from the same period last year. Analysts expect Eli Lilly’s earnings per share to grow at an average annual rate of 50% over the next five years. What about the company’s competitive advantage? Eli Lilly is one of the leading experts in diabetes and obesity drug development. It has a long track record of success in this area. Its lead product, tirzepatide, first received approval in 2022.

The company will benefit from patent protection well into the 2030s and contribute significantly to Eli Lilly’s revenue growth. This also emphasizes the growth opportunities that Eli Lilly has. Tirzepatide is indicated for the treatment of diabetes and obesity, with the latter market expected to skyrocket. Eli Lilly’s range goes much further than this one product. The company’s pipeline is just as exciting. Therefore, it continues to crush the market, but the ceiling is still far from being reached. There’s still plenty of upside potential left for Eli Lilly, making it a great stock to buy in May.

A deeply underestimated and undervalued stock

David Jagielski (Pfizer): The one healthcare stock I wouldn’t hesitate to buy this month is Pfizer. The stock is incredibly cheap, it pays dividends, and it’s still one of the safest healthcare investments you can own. Whether investors are overly bearish because of the lack of growth they expect this year, or are simply overly punitive on stocks because of declining vaccine demand, is irrelevant; Investors can get excellent value by buying the stock now.

There are several metrics that help highlight what kind of deal Pfizer stock is. It trades at 12 times estimated forward earnings and 1.7 times book value, and its price-to-earnings-growth (PEG) ratio is well below 1. Although investors are right to discount the stock given the future uncertainty and the patent cliffs. of the most important drugs facing the coming years, the sell-off has become extreme; Pfizer shares are trading at levels they haven’t been before more than a decade.

This could truly be a once-in-a-decade buying opportunity for investors. Pfizer expects minimal sales growth this year, but through acquisitions including last year’s purchase of Seagen and the development of its pipeline, it expects to add $25 billion in annual new product sales by the end of the decade.

It may not be an easy path forward for the healthcare company, but given the significantly lower price tag the stock is trading at, it’s easy to justify buying even more Pfizer stock today. And as a bonus to the potential upside, the stock also pays a dividend that yields 6.2%.

A monopoly plus huge new markets potentially on the horizon

Keith Speights (Vertex Pharmaceuticals): Only one company markets drugs that treat the underlying cause of cystic fibrosis (CF), a rare genetic disease. That company is Vertex Pharmaceuticals. Vertex should see plenty of growth in the CF indication, especially as the company plans to apply for regulatory approval this summer for what could be the most powerful CF therapy yet.

But as lucrative as Vertex’s monopoly on CF is, I’m even more excited about the vast new markets that may be on the horizon. The major biotech already has an approved product in two of those markets. Gene editing therapy Casgevy is a one-time functional remedy for sickle cell disease and transfusion-dependent beta-thalassemia.

Another huge market could open up for Vertex soon. The company recently submitted the first module of its ongoing US registration of suzetrigine (VX-548) for the treatment of acute pain. It expects to complete this application by the end of the second quarter of 2024. Acute pain is a multi-billion dollar market with significant unmet need. Suzetrigine should have great commercial potential to bridge the gap between safe but less effective anti-inflammatory drugs and highly addictive opioids.

Looking a little further, Vertex has a huge opportunity with inaxaplin in the treatment of APOL1-mediated kidney disease (AMKD). There is currently no approved therapy to treat the underlying cause of AMKD. The disease affects approximately 100,000 patients worldwide, compared to an estimated 92,000 CF patients. Vertex is evaluating inaxaplin in a phase 3 clinical trial.

Want more? Vertex plans to acquire Alpine Immunosciences for approximately $4.9 billion. This deal will bring povetacicept into Vertex’s pipeline. Alpine is on track to transition the experimental therapy into a Phase 3 trial targeting IgA nephropathy, a kidney disease that affects 130,000 patients in the US, in the second half of this year. Like AMKD, there are no approved therapies that treat the underlying cause of IgA nephropathy.

Vertex could have five new billion-dollar therapies within the next few years – and that’s just the recently approved programs that are in late stages. The major biotech’s pipeline also includes several promising early-stage programs, including most notably a potential cure for type 1 diabetes.