Prosper Junior Bakiny, The Motley Fool
·4 min read
Equity markets can be highly volatile in the short run. Where the S&P 500 might land in the next six months is anyone's guess. However, over a decade, major indexes tend to move steadily in the right direction and deliver competitive returns. That makes investing in stocks an excellent option for people looking to build their wealth over time.
Throwing money at any random corporation won't do, though. It's essential to pick wisely. With that out of the way, let's consider two excellent healthcare companies that could be top picks for the next 10 years: Medtronic (NYSE: MDT) and Sanofi (NASDAQ: SNY).
1. Medtronic
Medical device giant Medtronic hasn't performed well in the past few years. It has struggled with slow revenue growth, pandemic-related disruptions, and economic issues. However, it would be a mistake to dismiss a company with a track record like Medtronic so easily. It has been navigating the challenging and highly regulated healthcare industry for decades, routinely developing newer and better medical devices while surviving difficult economic conditions.
While the past is no guarantee of future success, Medtronic's underlying business still boasts the qualities that allowed it to thrive for this long. Furthermore, the company is changing things around to improve its performance. Medtronic is getting rid of its low-growth patient monitoring and respiratory intervention unit. The company is doubling down on areas with higher growth potential, such as its diabetes care segment.
In the second quarter of its fiscal 2024, ended on Oct. 27, 2023, Medtronic's diabetes care unit reported revenue of $610 million, 9.7% higher than the year-ago period. If that doesn't sound like a lot, note that its total revenue of $8 billion increased by just 5.3%. None of the company's other major segments beat diabetes care in terms of revenue growth. This is partly due to the continued adoption of its MiniMed 780G, an innovative insulin pump that helps keep glucose levels in check. The MiniMed 780G was only launched in the U.S. last year, so there is more room for growth.
Elsewhere, Medtronic is increasingly applying artificial intelligence to improve its products, efforts that could prove highly lucrative down the line. The company has more growth avenues, including its Hugo system in the robotic-assisted surgery market.
Finally, investors shouldn't overlook Medtronic's exceptional dividend record. The company is currently on its 46th consecutive year of dividend hikes -- since 1978, its dividend per share has increased at a compound annual growth rate of 16%. The medical device maker should become a Dividend King within a few years.
Medtronic is a great option for income-seeking investors and those in the market for a steady, reliable company that will deliver solid returns over the long run.
2. Sanofi
Sanofi's stock performance hasn't been strong over the past year, partly because of less-than-stellar revenue and earnings growth in 2023. The drugmaker's top line increased by just 5.3% year over year to 43.1 billion euros ($46.4 billion), while it reported net earnings per share of 8.11 euros ($8.70), down almost 2% compared to the fiscal 2022. However, the company made significant clinical and regulatory progress last year.
First, it earned approval for Beyfortus, one of the first vaccines for respiratory syncytial virus to hit the market. Sanofi also launched a brand-new hemophilia medicine called Altuviiio. On the clinical front, the company reported positive results for its biggest growth driver, Dupixent, in treating COPD. This additional indication should substantially improve Dupixent's already fast-growing sales.
There is more going on with Sanofi. Last year, it announced that it would spin off its consumer healthcare business, a move that's become pretty popular among pharmaceutical giants in recent years. The transaction should be complete by the fourth quarter. Sanofi wants to double down on its core biopharmaceutical operations. The move should help the biotech push important programs through the pipeline.
Sanofi expects at least five new investigational vaccines -- one of its best-performing segments in the past few years -- to enter late-stage studies by next year. The company's existing phase 3 pipeline is already rich, boasting 28 programs, and there are dozens more in phase 1 and 2 studies. A handful of approvals or new indications per year is well within reach for the drugmaker.
With such catalysts, Sanofi should be able to deliver solid returns in the next 10 years.
Should you invest $1,000 in Medtronic right now?
Before you buy stock in Medtronic, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the10 best stocks for investors to buy now… and Medtronic wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service hasmore than tripledthe return of S&P 500 since 2002*.
*Stock Advisor returns as of February 12, 2024
Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool recommends Medtronic. The Motley Fool has a disclosure policy.
2 Healthcare Stocks You Can Buy and Hold for the Next Decade was originally published by The Motley Fool
