Don’t let the summer heat keep you from making money. July is a great time to invest in the stocks of top-tier companies.
Three Motley Fool contributors think they’ve found no-brainer stocks to buy this month. Here’s why they picked healthcare stocks AbbVie (ABBV -0.93%), Eli Lilly (LLY 0.16%), and Vertex Pharmaceuticals (VRTX 0.59%).
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Something for every investor
Keith Speights (AbbVie): Growth investors typically aren’t interested in the stocks that are appealing to income investors or value investors. And vice versa. However, I think there’s one stock to buy in July that offers something for every investor: big drugmaker AbbVie.
Income investors should love AbbVie. It’s a Dividend King with an impressive 53 consecutive years of dividend increases. Since spinning off from Abbott Laboratories in 2013, AbbVie has boosted its dividend payout by 310%. The pharmaceutical giant’s forward dividend yield is also a juicy 3.47%.
What about value investors? AbbVie’s shares trade below 15.6 times forward earnings. By comparison, the S&P 500‘s forward price-to-earnings ratio is 22.4, while the S&P 500 healthcare sector’s average forward earnings multiple is 16.3. Perhaps most intriguing, though, is AbbVie’s super-low price-to-earnings-to-growth (PEG) ratio of 0.4, based on five-year earnings growth projections of analysts surveyed by LSEG.
That brings us to what AbbVie offers for growth investors. Granted, the company isn’t poised to deliver the jaw-dropping levels of growth that some tech stocks might. However, AbbVie should hold its own, thanks to fast-growing therapies including Rinvoq and Skyrizi. With its dividends added to the mix, I predict that this pharma stock will deliver market-beating total returns over the next several years.
Eli Lilly stock could be overdue for a big rally
David Jagielski (Eli Lilly): One growth beast that continues to be an attractive buy this year is Eli Lilly. It’s up only around 1% since the start of the year, and over the past 12 months, it has declined by 13%. While some investors may be worried about growing competition in the GLP-1 space, Eli Lilly has established itself as a leader there, with two fantastic products in Zepbound for weight loss and Mounjaro for diabetes.
A lot of healthcare companies are developing weight loss drugs, but it’s by no means easy to do so. Pfizer stopped the development of its daily weight loss pill after a trial participant experienced a liver injury. And Amgen recently released phase 2 trial results for its monthly treatment, MariTide, where tolerability was a problem. When patients didn’t ramp up their dosages, discontinuation rates were as high as 27%.
Although there may be competition in the GLP-1 weight loss market, that doesn’t mean there will be many drugs that will be as safe and effective as Zepbound, which can help people lose more than 25% of their body weight.
Meanwhile, Eli Lilly also has a diverse business that goes beyond just weight loss. Last year, for example, it obtained approval for an Alzheimer’s drug, Kisunla, which has the potential to be yet another blockbuster for the business.
The company’s sales through the first three months of the year totaled $12.7 billion and rose by an impressive rate of 45% year over year. With solid results such as these and the business still on the cusp of much more growth, Eli Lilly is a no-brainer buy right now given all the potential it possesses. Although its stock is trading at more than 60 times its trailing earnings, the premium looks to be well worth it.
New era, same results
Prosper Junior Bakiny (Vertex Pharmaceuticals): Over the past decade, Vertex Pharmaceuticals, a leading biotech, has generated excellent financial results and market-beating returns, thanks to its work in cystic fibrosis (CF). The drugmaker owns the only therapies that address the underlying causes of this rare disease. Vertex is still making breakthroughs in its core area. Late last year, it earned approval for Alyftrek, a next-gen CF medicine.
However, Vertex Pharmaceuticals has entered a new era, one where it has a more diversified lineup. Since 2023, it has earned approval for Casgevy, a medicine that treats two blood-related disorders, and Journavx, a therapy for acute pain.
Meanwhile, Vertex Pharmaceuticals plans on submitting regulatory applications for zimislecel, an investigational therapy for type 1 diabetes, next year. Furthermore, Vertex Pharmaceuticals has other non-CF candidates in various stages of development. The biotech still has room to grow in its central therapeutic area, but these new approvals in different fields have arguably made the stock even more attractive. Here’s what I expect from Vertex Pharmaceuticals in the next five years.
The drugmaker will make significant clinical progress and earn at least one brand-new approval and likely several label expansions. Vertex Pharmaceuticals should also continue delivering consistent revenue and earnings growth. Although the company’s shares fell because of somewhat disappointing first-quarter results, Vertex Pharmaceuticals’ long-term prospects look incredibly attractive. The stock appears to be a no-brainer buy today.