Finance
Forget Nvidia, these unstoppable stocks are better buys
Nvidia has been a great stock to own in recent years, generating incredible returns for investors. But the risk is that expectations are too high for the stock, especially when it comes to artificial intelligence (AI). And that means the stocks could be vulnerable to a sell-off if reality doesn’t match the sky-high expectations investors and consumers have created for AI.
The future of AI is difficult to predict. What is much more predictable is the need for healthcare and the growing demand that will come from a larger and aging population. And in that sense, investors might be better off if they consider investing in something that’s unstoppable healthcare stocks that are ready for major growth in the coming years. Eli Lilly (NYSE: LLY), Novo Nordisk (NYSE: NVO)And UnitedHealth Group (NYSE:UNH) may be safer growth stocks for investors to consider than Nvidia. This is why these stocks look so attractive right now.
1. Eli Lilly
Eli Lilly has become the most valuable healthcare stock in the world, with a market capitalization of approximately $700 billion. But there is still a lot more room to increase in value, for two main reasons: Mounjaro and Zepbound. The former is the diabetes medicine and the latter is the weight loss medicine. Both are essentially the same because they contain the active ingredient tirzepatide, but they are approved for different indications. Combined, they could generate at least $50 billion in annual revenue at their peak. For a company that reported $34 billion in revenue last year, that could be an incredible amount of growth in store for Eli Lilly.
And there are many obesity-related problems and diseases that could benefit from tirzepatide, meaning there is potential for it to gain approval for more indications, leading to even greater potential benefit. For example, in a clinical trial, tirzepatide has been shown to be effective in treating metabolic dysfunction-associated steatohepatitis, a form of fatty liver disease.
Additionally, Eli Lilly’s early Alzheimer’s treatment, donanemab, may receive approval from the Food and Drug Administration (FDA) later this year, and that could also be a possible solution. blockbuster drug and generate billions in revenue for the company.
Eli Lilly shares aren’t cheap, trading at more than 120 times residual earnings. But with so much growth ahead, this could still be a fantastic buy in the long term. Healthcare stocks may be the first to reach a $1 trillion market cap. There is a significant need for the treatment of Alzheimer’s disease, obesity and diabetes, and if the company can have products that can help in all of these areas, then Eli Lilly could truly be an unstoppable stock to to own.
2. Novo Nordisk
Novo Nordisk is similar to Eli Lilly in that it has some top treatments for diabetes and weight loss. Although it is approved for diabetes, Ozempic is popular on social media for its ability to help people lose weight. Wegovy is the company’s rising star in the weight loss space, and Novo Nordisk is rolling it out to more countries around the world. Demand for its medicines is so high that Novo Nordisk has invested billions in additional capacity.
In March, the FDA approved Wegovy as a treatment to reduce cardiovascular risk in obese and overweight people. With that approval, more health insurers plan to cover the treatment, as it becomes clear that it can be more than just an effective weight loss drug. Ozempic, meanwhile, has shown in a recent clinical trial that it can reduce the risk of kidney disease worsening in patients.
As more studies are done, even more potential uses for these treatments may come to light, which could lead to regulators approving the drug for additional indications. The demand in obesity and diabetes is so high that there is room for both Eli Lilly and Novo Nordisk to have great drugs in these categories and both companies can thrive. Instead of picking a winner between the two, investors should consider owning both.
At 47 times earnings, Novo Nordisk is a cheaper buy, but it is slightly less diversified than Eli Lilly. However, it also seems to be an unstoppable stock.
3. UnitedHealth Group
UnitedHealth Group is a leading health insurer in the country. The company doesn’t have any major, breakthrough drugs in its portfolio, but its business can still generate impressive numbers over the years as the number of patients needing healthcare increases. And that will likely happen as the number of seniors increases in the coming years.
The company has also invested in expanding its activities. Last year it acquired LHC Group, a home care company. The company is also in the process of acquiring another similar company, Amedisys; however, that deal has not yet been closed.
UnitedHealth is already a huge company. It generated more than $370 billion in revenue last year and profits were more than $22 billion. Over the long term, the company expects earnings to grow by about 13% to 16%.
The company has been dealing with some bad press lately due to a data breach involving its subsidiary Change Healthcare, but that shouldn’t stop investors from taking ownership of one of the top healthcare companies within the UnitedHealth Group, which has many has growth potential. Recent earnings numbers have been depressed by the fallout from the recent cyber attack, but based on estimated future profits, UnitedHealth Group looks cheap: it trades at a multiple of just 18.
Should You Invest $1,000 in Eli Lilly Right Now?
Consider the following before purchasing shares in Eli Lilly:
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool recommends Novo Nordisk and UnitedHealth Group. The Motley Fool has one disclosure policy.
Forget Nvidia, these unstoppable stocks are better buys was originally published by The Motley Fool
