A few different elements can make a stock a no-brainer buy. The company could be the leader in its market, or well diversified across various markets. In any case, it should have a solid track record of earnings growth and promising long-term prospects. It should be the sort of company that you can add to your portfolio, then sit back and relax -- because you're confident that this player will excel over time.
It's the kind of stock you'll want to buy now and hold on to for the long haul, and by this, I mean the next five to 10 years. This gives the company the time to grow earnings, and this ideally will translate into gains in the stock price. As a long-term investor, you could benefit not just over one year, but potentially over most of your time owning the stock.
If you have $1,000 to invest right now -- or even less -- here are two no-brainer healthcare players that make a great addition to any portfolio.
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1. Intuitive Surgical
Intuitive Surgical (ISRG -1.39%) is the global leader in robotic surgery. With a compound annual growth rate of about 15%, this market is expected to reach more than $25 billion by 2030, according to Meticulous Research. Intuitive's flagship product is the da Vinci, a system used in a wide variety of surgeries, from cardiac, gynecology, and urology to general surgery such as hernia procedures.
Intuitive suffered early in the pandemic as hospitals worldwide postponed surgeries, but in more recent times, procedure volume has been going strong. In the recent quarter, da Vinci procedures increased 18% year over year, and revenue climbed 17% to more than $2 billion. Importantly, Intuitive grew its installed base by 15% to more than 9,500 systems as of the end of September.
I like Intuitive's strong moat, or competitive advantage, which has two parts. First, surgeons train on the da Vinci and are used to the platform, so it's unlikely they'll want to switch to a rival. Second, after spending more than $1 million on a robot, hospitals will probably continue using the platform, aiming to amortize the investment over a period of years.
I also like the idea that Intuitive makes most of its revenue not from selling the actual robots, but from selling instruments and accessories required for the procedures. This is positive because it offers the company a form of recurrent revenue, so revenue from the da Vinci doesn't end with the purchase or leasing of the actual platform.
Intuitive may look expensive, trading at more than 75x forward earnings estimates, but it's worth the price considering its leadership, moat, and guarantee of recurrent revenue.
2. Abbott Laboratories
Abbott Laboratories (ABT -0.53%) is a well-diversified healthcare company, with four distinct units: Medical devices, diagnostics, nutrition, and established pharmaceuticals. This is great because it means if one of these businesses faces tough times, another could compensate and maintain overall growth.
This is actually happening right now. With coronavirus testing on the decline, the diagnostics business has seen revenue fall. But in the recent quarter, the medical devices unit delivered double-digit revenue growth, helping Abbott to report a 5% increase in revenue to $10.6 billion. Over time, Abbott has delivered gains in revenue and profit.
ABT Revenue (Annual) data by YCharts.
Abbott sells market-leading products across its businesses, from the Ensure brand in its nutrition business to the FreeStyle Libre continuous glucose monitoring system in its medical devices unit. In fact, Abbott's sales of glucose monitoring systems generated more than $1.6 billion in the recent quarter for a year-over-year increase of about 20%.
The company also has a full pipeline of innovations to keep the growth going. It most recently launched Lingo, a continuous glucose monitoring platform for wellness purposes. Without a prescription, you can gain access to this system to monitor your metabolic health.
Abbott shares trade for about 23x forward earnings estimates. That's a very reasonable price to pay for a company that has a strong track record of growth, market-leading products, and solid long-term prospects.
