Many products sold by companies aren’t must-have items. However, healthcare is a necessity. And the healthcare sector is poised to grow over the next decade and beyond with aging populations around the world.
These factors make healthcare stocks a great addition to investors’ portfolios. You won’t need a huge amount of cash to get started investing, either. If you have only $1,500 to invest, here are three healthcare stocks to buy and hold forever (listed alphabetically).
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Sooner or later, every successful drugmaker will face a “patent cliff.” Drugs that raked in a lot of money in the past will lose their patent exclusivity and face competition from biosimilars or generics. To remain successful, drugmakers must have newer products ready to pick up the slack from the older ones. AbbVie (NYSE: ABBV) could be the poster child for how to effectively navigate a patent cliff.
When Abbott Labs spun off AbbVie in 2013, Humira was the new company’s cash cow. The autoimmune disease drug ranked as the world’s top-selling medication for years. AbbVie used nearly every trick in the book to extend Humira’s reign, but it knew the day would eventually come when biosimilars would enter the market. That day came in the U.S. in 2023.
However, AbbVie was well prepared. The company had invested in research and development. It made smart acquisitions. By the time Humira lost patent protection, AbbVie had significantly reduced its dependence on the drug. It also already had two successors with fast-growing sales on the market: Rinvoq and Skyrizi.
AbbVie has proven its ability to survive and thrive in the face of challenges. You can pick up a share of the big biopharmaceutical company for around $173. That investment will begin to pay off almost immediately, too. AbbVie offers a forward dividend yield of 3.8%. The drugmaker is a Dividend King with 52 consecutive years of dividend increases (including its time as part of Abbott).
Consider taking another $600 or so of your initial $1,500 to buy a share of Intuitive Surgical (NASDAQ: ISRG). The company launched its da Vinci robotic surgical system in 2000 and continues to dominate the robotic surgical market.
Intuitive Surgical is a perfect modern example of the razor-and-blades business model. In 2024, 84% of the company’s total revenue was recurring — in large part from replacement instruments for its da Vinci systems. This percentage of recurring revenue is growing, by the way. In 2017, it was 71%.
I’d be leery about buying most stocks that trade at a forward earnings multiple of 76, as Intuitive Surgical does. However, I think a premium valuation is warranted in this case. Intuitive continues to grow its installed base and procedure volumes by double-digit percentages. More importantly, its growth prospects are huge.
Around 2.78 million procedures were performed using Intuitive Surgical’s robotic surgical systems last year. That’s less than 35% of the procedures performed each year for which the company already has products and clearances. Intuitive estimates its products and clearances under development will enable it to target roughly 22 million soft tissue procedures performed annually.
After buying one share each of AbbVie and Intuitive Surgical, you’d have more than enough left to scoop up a share of Vertex Pharmaceuticals (NASDAQ: VRTX). The big biotech stock currently trades at around $430.
Why buy and hold Vertex stock forever? A quick look at the company’s product lineup and pipeline can easily answer the question.
Vertex commands a monopoly in treating the underlying cause of cystic fibrosis (CF), a rare genetic disorder. That monopoly is now arguably stronger than ever with the recent U.S. Food and Drug Administration (FDA) approval of Alyftrek, the company’s most powerful CF therapy yet.
Another product, gene-editing therapy Casgevy, is still in the early stages of its commercial launch. Vertex also awaits the imminent FDA approval decision for suzetrigine, a non-opioid drug for treating acute pain.
Several other potential blockbuster drugs could be on the way. Vertex’s late-stage pipeline includes four programs. The biotech company is evaluating suzetrigine in treating diabetic peripheral neuropathy. It has two late-stage therapies targeting kidney diseases: inaxaplin for treating APOL1-mediated kidney disease and povetacicept for treating IgA nephropathy. Vertex even has a potential cure for severe type 1 diabetes in pivotal development with zimislecel.
What I like most about Vertex is that it has demonstrated an ability to leverage success in one area (CF) to expand into other areas. I expect the company will continue to do this in the future, making a lot of money for investors along the way.
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Keith Speights has positions in AbbVie, Intuitive Surgical, and Vertex Pharmaceuticals. The Motley Fool has positions in and recommends AbbVie, Abbott Laboratories, Intuitive Surgical, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
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