HThere are two reasons why we could soon suffer a stock market crash. First, market valuations are at their highest level in 10 years, as measured by the cyclically adjusted price / earnings (P / E) ratio. Second, there is a new strain of the virus that causes COVID-19 to circulate – and this new variant, called an omicron, could delay our economic recovery.
Of course, neither of these reasons suggest a downturn is on the way, but it doesn’t hurt to be prepared. One way to do this is to have a list of stocks ready to be picked up when dropping. With that in mind, here are two great companies that could become even more attractive in the event of a market downturn: Intuitive surgery (NASDAQ: ISRG) and Eli lilly (NYSE: LLY).
1. Intuitive surgery
Intuitive Surgical is one of the market leaders in Robot Assisted Surgery (RAS) – thanks to its da Vinci Surgical System which enables physicians to perform minimally invasive surgeries. By some estimates, only 3% of procedures are performed robotically. This despite the fact that minimally invasive surgeries have several benefits for patients, including smaller incisions, less bleeding, faster recovery times, and less time spent in the hospital.
But the medical world seems to be gaining momentum. The company ended the third quarter with 6,525 of its systems installed globally, up 11% from last year. And while competitors such as Medtronic and Stryker lurking, Intuitive Surgical has a nearly 80% share of that market – and should continue to do so. This is because of the high switching costs. After dropping at least half a million dollars on the da Vinci system, healthcare facilities will be reluctant to jump ship.
Intuitive Surgical has dramatically outperformed the market over the past two decades, and there is good reason to believe that it can continue to do so as its RAS devices are increasingly adopted. In addition, a growing portion of its revenue comes from the sale of instruments and accessories that come with its da Vinci system.
Image source: Getty Images.
Intuitive’s financial results continue to be encouraging. In the third quarter, revenue increased 30% to $ 1.4 billion from a year earlier. About 54% of that came from sales of instruments and accessories. Sales in this segment depend on the number of interventions carried out with its da Vinci system. In other words, as the RAS gains global penetration, revenues are expected to increase. Last quarter earnings per share increased 19.5% to $ 1.04.
Right now, with a futures P / E ratio of 68, the stock isn’t cheap. But a full-blown bear market could make the healthcare giant more attractive, giving investors one more reason to buy shares of this obvious stock.
2. Eli Lilly
Eli Lilly was one of the top performers large pharma actions this year. Unfortunately, the company’s shares have also gotten even more expensive than they already were. Eli Lilly’s forward P / E is currently around 30, more than double the pharmaceutical industry average. If a market correction offers a more attractive entry point, here are some of the reasons Eli Lilly is a solid stock to buy and hold.
On the one hand, five of the company’s products have reached blockbuster status so far this year (meaning they’ve made at least $ 1 billion in sales). And three of them – the diabetes drugs Trulicity and Jardiance as well as the immunosuppressant Taltz – continue to show strong sales growth. Trulicity sales grew 28.7% year-on-year to $ 4.6 billion in the first nine months of the year, while Taltz revenue reached $ 1.6 billion, or 21 billion % more than a year ago. Jardiance sales jumped 26% year-on-year to $ 1.1 billion.
Image source: Getty Images.
These are not Eli Lilly’s only growth drivers, however. The anti-cancer drug Verzenio and the company’s COVID-19 antibodies also continue to perform well. In the first nine months of this year, sales of Verzenio amounted to $ 945.8 million, almost 50% more than the period of the previous year, while the antibodies saw sales of $ 1.2 billion. Global revenue increased 18% to $ 6.8 billion, an excellent performance for a pharmaceutical giant.
In her latest quarterly update, Eli Lilly announced that she is making an ongoing request to the United States Food and Drug Administration for expedited approval of donanemab, a potential treatment for Alzheimer’s disease (AD). The business will likely face some obstacles in the AD market, but if donanemab is approved, it could add another exciting product to its lineup.
This potential drug is just the tip of the iceberg. Eli Lilly claims a long list of pipeline programs. So expect the company to expand its revenue base with new approvals and tag extensions, all of which should do wonders for its earnings and stock price in the long run. Meanwhile, stay tuned to buy shares of this pharmaceutical giant in the next stock market crash.
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Prosper Junior Bakiny owns shares of Intuitive Surgical. The Motley Fool owns shares and recommends Intuitive Surgical. The Motley Fool recommends the following options: January 2022 long calls for $ 193.33 on Intuitive Surgical and January 2022 short calls for $ 200 on Intuitive Surgical. The Motley Fool has a disclosure policy.
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