2 best stocks to buy in March and hold forever
Sometimes the best healthcare stocks are hiding in plain sight. They may not be the biggest companies or the biggest newsmakers, but they consistently turn out strong numbers. The best part about stocks like these is that they’re good business because they’re not necessarily household names.
Two that stand out right now are Novartis (NYSE: NVS) and Meridian Bioscience (NASDAQ: VIVO). Novartis has an impressive pipeline and generous dividend yet its shares are down more than 5% this year. Meridian Bioscience isn’t quite as overlooked, but its stock should do even better given the company’s consecutive years of record revenues.
Novartis is too good to pass up
The Swiss pharmaceutical company Novartis operates in three segments: innovative medicines, generics and biosimilars (under the Sandoz label) and nuclear medicine. Novartis has grown its revenue just 1.74% a year over the past decade, but there’s reason to think it could shake off that sluggishness.
In fact, its research and development spending is paying off with a deeper pipeline. In 2021, the company increased sales 6% year-over-year to $51.6 billion on the back of strong performance from the company’s innovative medicines segment, which increased sales 8% compared to 2020. % from one year earlier.
One of the biggest gainers in the segment was heart drug Entresto with reported revenue of $3.5 billion in 2021, up 42% year-over-year. The other was Zolgensma, a gene therapy for pediatric patients with spinal muscular dystrophy; it recorded $1.4 billion in sales in 2021, up 47% from the same period a year earlier.
Earnings per share (EPS) in 2021 was $10.71, up 202%, although that was largely due to Novartis divesting its $20.7 billion stake in Roche Holding. The sale is the main reason Novartis is now down to $900 million in debt, down from $24.5 billion a year ago.
The company’s top-selling drug, Cosentyx, had sales of $4.6 billion in 2021 and was recently approved as the only biologic to treat two forms of juvenile idiopathic arthritis – arthritis related to arthritis. enthesitis (ERA) and juvenile psoriatic arthritis (JPsA). On top of that, Novartis has 20 therapies in its pipeline that could be approved by 2026; if so, the company estimates it would bring in $1 billion in sales.
While waiting for these assets to bear fruit, investors are benefiting from Novartis’ quarterly dividend, which it has just increased by 3.3% to $2.18 per share. It was the 25th consecutive annual dividend increase, making the stock a freshly minted dividend aristocrat. The dividend is currently yielding 4.07%, nearly triple the S&P500average dividend of 1.27%. Considering fourth quarter EPS was $7.29, the dividend looks safe.
The company offers a great opportunity because its price is, I believe, much lower than its value. Its price/earnings ratio (P/E) is 8.6, well below the average P/E of 19.5 for the pharmaceutical sector.
Meridian Bioscience is a silent and stable player
Meridian manufactures and sells diagnostic test kits, purified reagents and other technologies for the early diagnosis and treatment of medical conditions. Most of its business involves performing diagnostic tests for gastrointestinal and respiratory infectious diseases and parasitic infectious diseases.
The Cincinnati-based company had a second straight record year in 2021, beating its original revenue and net profit forecast. It reported annual revenue of $317.9 million, up 25% from 2020, and adjusted diluted EPS of $1.66, a 55% year-over-year increase. ‘other.
The small cap announced its first quarter of fiscal 2022 on February 4. While revenue fell 5% year-over-year to $88.3 million, it was still Meridian’s second-best quarter, and it was up 15.8% sequentially. The company has two segments: Life Sciences, which had revenue of $55.1 million, down 12% year-over-year, and Diagnostics, which recorded a revenue of $33.2 million, up 10% from the same period in 2021.
All but one of the diagnostic tests saw their revenue increase, thanks to a 40% gain in gastrointestinal diagnostics and 33% in respiratory diagnostics. The fall in the life sciences segment was driven by a 32% decline in molecular reagents revenue.
The company also updated its full-year guidance for revenue of $315-330 million and EPS of $1.10-1.30; at the midpoint, that means he expects an 8.5% increase in revenue but a 27% decline in EPS.
Notably, Meridian’s COVID-19 testing materials have brought it longer-term customers. In 2018, the company had seven clients who each provided at least $1 million in sales; today, she has 40 clients, each with sales of $1 million or more. Meridian will benefit from its COVID tests for a long time to come, but more importantly, its tests are now on customers’ radars.
The company’s stock is up more than 24% this year, but its P/E of 18.6 remains quite reasonable.
Make a good long-term choice
Meridian and Novartis are different healthcare companies, but each has grown earnings before interest, taxes, depreciation, and amortization (EBITDA) by 126% or more over the past five years, well above the S&P average pace. 500. Meridian is not forgotten. both because of its fundamentals, but because it’s still a relatively small company. Novartis is starting to see bigger revenue gains, and its pipeline should add to those gains. Both companies are undervalued, giving investors the opportunity to get in and hold long-term returns.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.