3 no-brainer stocks to buy in July
SSome investment decisions require a long period of analysis, but not all. Some actions stand out as easy choices.
We asked three Motley Fool contributors to identify obvious stocks to buy in July. Here’s why they chose Eli Lily (NYSE:LLY), Pfizer (NYSE: PFE)and Vertex Pharmaceuticals (NASDAQ: VRTX).
This stock is just getting started
Prosper Junior Bakiny (Eli Lilly): Winners keep winning. There aren’t many big pharma companies that have been bigger winners than Eli Lilly over the past year. Shares of the company are up nearly 40% in the past 12 months, putting the performance of the healthcare sector comfortably and S&P500 to shame.
But that’s just the beginning, because Eli Lilly’s business is made up of some pretty tough stuff. We can mention the drugmaker’s strong position in the diabetes drug market as proof. For example, Eli Lilly dominates the insulin market, with Sanofi and Novo Nordisk. Lilly also continues to innovate. One of its most recent approvals was for Mounjaro, a very promising therapy for type 2 diabetes (T2D).
The company is developing basal-Fc (BIF) insulin, a weekly insulin product for patients with T2DM, which may also be very successful. Diabetes will likely become a bigger problem in the coming years as the population ages. Lilly has demonstrated the ability to develop new therapies for this patient population.
The drugmaker also has a series of drug programs and pipelines in other therapeutic areas. Sales of cancer drugs Verzenio, migraine treatment Emgality and immunosuppressant Taltz continue to grow strongly. Lilly is conducting dozens of clinical trials, including some in the area of immunology and a potential Alzheimer’s drug called donanemab.
In short, the future is bright for Eli Lilly because it has many of the key ingredients a pharmaceutical giant needs to be successful in the long run. This includes a strong drug pipeline (many of which generate over $1 billion in annual sales), a valuable pipeline to manage patent cliffs, and strong earnings and cash flow to continue investing in research. and development.
This is why this winner will continue to win. And that’s why it’s a great stock to buy today.
A great choice for dividend- and growth-oriented investors
David Jagelsky (Pfizer): If there’s one healthcare stock I’d tell someone to buy right now, it’s Pfizer. For dividend investors, Pfizer pays an above-average yield of 3.1% (vs. the S&P 500 average of 1.7%). The company has also increased its quarterly dividend every year since 2010. Its payout ratio remains modest at around 36%, leaving plenty of room for further dividend increases in the future.
Meanwhile, for growth investors, the company is building its pipeline for increased revenue growth in the future. Much of Pfizer’s COVID-19-related revenue may not be there in a few years, but that doesn’t mean the company won’t reap the rewards just yet due to all the extra cash flow it’s got. it has generated in recent years. .
Pfizer has acquired Trillium Therapeutics, ReViral and Arena Pharmaceuticals in the last 12 months alone. It also has an ongoing deal to acquire Biohaven Pharmaceuticalswhich is expected to close next year.
The major drugmaker is bolstering its pipeline with these acquisitions in preparation for the inevitable drop in COVID-19 vaccine sales. He will probably have a big void to fill. Sales of its COVID-19 vaccine and pill are expected to total about $54 billion this year, just over half of total revenue.
But with 29 Phase 3 trials currently underway and another 61 in Phases 1 and 2 combined, Pfizer has plenty of products that could help offset a drop in sales in the future. This should soften the overall hit. Additionally, Pfizer’s combined cash and short-term investment balance of $23.9 billion can also go a long way toward funding additional acquisitions to help expand this pipeline.
Pfizer shares are much cheaper than the broader healthcare sector, with shares trading at less than eight times expected earnings. While some discount is warranted given the uncertainty ahead, Pfizer’s stock appears to be significantly undervalued at the moment.
A big rolling biotech
Keith Speights (Vertex Pharmaceuticals): I think Vertex is by far the best biotech stock on the market right now. And it’s not just because the stock has soared more than 30% so far this year.
Vertex remains a behemoth in the cystic fibrosis (CF) market. He developed the only approved drugs that address the underlying cause of the rare genetic condition. No potential competitor has yet advanced a product beyond Phase 2 testing.
I’m also very optimistic about Vertex’s pipeline. Biotech and its partner, CRISPR therapeutics, expects to file for regulatory approval for gene-editing therapy exa-cel later this year for the treatment of beta-thalassemia and sickle cell disease. Exa-cel has the potential to be a successful cure for these rare blood disorders.
Vertex has a promising late-stage candidate targeting APOL1-mediated kidney disease. This market could be even bigger than CF for the company. It is also advancing a non-opioid painkiller into pivotal Phase 3 testing this year.
In addition to these programs, Vertex could be a game-changer for type 1 diabetes (T1D) patients along the way. It has already had early success with VX-880 in Phase 1 testing.
Vertex’s price/earnings/growth (PEG) ratio is just 0.42. With the company’s low valuation and stellar growth prospects, its stock really does look like an obvious choice right now.
10 stocks we like better than Vertex Pharmaceuticals
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David Jagielski has no position in any of the stocks mentioned. Keith Speights holds positions at Pfizer and Vertex Pharmaceuticals. Prosper Junior Bakiny holds positions at Vertex Pharmaceuticals. The Motley Fool holds positions and endorses CRISPR Therapeutics, Eli Lilly and Company, and Vertex Pharmaceuticals. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.