2 Best Stocks to Buy in November and Hold Forever
Earnings reports can be an investor’s best friend. They don’t just tell us about recent revenue and earnings. They also offer us clues about the future of a business. These reports do not have to be 100% positive. But if some major points are bright, we might consider a buying opportunity.
This is the case for both AbbVie (ABVV 0.29%) and Intuitive surgery (ISRG 2.80%). Businesses are each facing specific challenges right now. But they also gave us very good reasons to be optimistic about the future. Let’s take a closer look at these top two stocks to buy this month and hold forever.
I’m going to brush off the bad news first. AbbVie’s super blockbuster immunological drug, Humira, is expected to face US competition from next year. Humira’s international sales are already down as rivals outside the United States take market share.
But here’s why I’m optimistic about AbbVie. The company’s two new immunology drugs – Skyrizi and Rinvoq – are on track to make up for the loss. In the third-quarter earnings report, AbbVie said the two drugs are expected to generate $7.5 billion in revenue this year. And their combined revenue is expected to eventually exceed Humira’s.
AbbVie also has a strong and diversified portfolio. Besides immunology, it includes products in the areas of neuroscience, oncology, aesthetics and other fields. In fact, the company is on track to become the world’s No. 1 in prescription drug market share by 2026, according to data from Evaluate.
AbbVie has a track record of growing profits over time. Of course, Humira is a key contributor. But Skyrizi and Rinvoq seem poised to keep this growing positive trend going. During the quarter, they accounted for nearly 15% of the company’s total revenue.
You will also like AbbVie for its dividend. The company is a dividend king. This means that it has increased its dividend payout at least over the past 50 years. This shows that dividend growth is important to AbbVie. And that’s great news for you as an investor.
AbbVie shares are trading today at 10 times forward earnings estimates, up from more than 12 earlier this year. This seems like a reasonable entry point given the company’s growth prospects and its dividend policy.
2. Intuitive surgery
Intuitive’s main problem during the pandemic has to do with hospitals postponing surgeries with its surgical robots. This happened at times when coronavirus hospitalizations peaked.
Why does it hurt Intuitive? Because Intuitive actually makes more revenue from selling the instruments and accessories needed for each surgery than it does from selling its million-dollar robots.
Postponement of surgeries remains a risk. But as we move into a post-pandemic world, that risk might be lower than it has been lately. Things seem to be on the right track. In the third quarter, global procedures using the flagship Da Vinci robot increased by 20%. Revenue grew by double digits.
And, most importantly, Intuitive repurchased $1 billion of its own common stock. It is a sign of confidence in the future of the company.
Like AbbVie, Intuitive has a track record of growing profits over time. Importantly, Intuitive is also a market leader. The company has nearly 80% of the robotic surgery market, according to BIS Research. Given the price of surgical robots, hospitals are unlikely to easily switch to a rival. So, Intuitive might stay ahead for a while.
Intuitive trading at 54 times forward earnings estimates. That’s down from over 72 in January. At the same time, income increases. So right now seems like the right time to embark on this exciting long-term story.
Adria Cimino has no position in the stocks mentioned. The Motley Fool fills positions and recommends Intuitive Surgical. The Motley Fool has a disclosure policy.