There’s a lot of uncertainty in the air right now. Between rumors of a recession, rising interest rates, and inflation, it’s tough to find stocks that you’re confident will keep growing instead of going to zero.
The good news is there are companies that aren’t likely to stumble off of their long-term growth trajectory even with the economy and the market in flux. So, if you’re looking for a few options for where to park $5,000 of your hard-earned dosh, these two stocks just might be up your alley.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX 2.67%) is worth a $2,500 investment because it’s the world’s largest public business devoted to curing rare diseases, and it’s proven to be quite adept at that goal so far. Thanks to the success of its portfolio of medications treating cystic fibrosis (CF), a lung disease estimated to affect around 83,000 people in the Western world, over the last 10 years its shares have risen by 403%, a massive improvement over the market’s return of near 211%. In 2021, sales of its CF therapies alone were worth more than $7.5 billion, which is a huge increase compared to 2011’s total of just over $1.4 billion.
Now it’s setting its sights on making treatments for new rare illnesses in order to keep its profitable top-line growth going for the next decade and beyond. In particular, it has a phase 2/3 program for APOL1-mediated kidney disease, not to mention a pair of potentially curative gene therapies for the rare blood disorders beta thalassemia and sickle cell disease that it’s developing in conjunction with CRISPR Therapeutics. The point of trying to compete in these niche markets is that there won’t be much competition, as patients don’t have many (or often any) other options for treatment.
Aside from the regular drumbeat of its earnings reports, the company also has a handful of upcoming catalysts that could reward shareholders. Before the end of 2023, it could notch an expanded approval for one of its CF therapies, file the paperwork for another expanded indication in CF, and initiate a new phase 2 trial for neuropathic pain.
In the long term, expect Vertex to keep leveraging its undisputed base of revenue derived from CF to fund its forays into other markets — and don’t count on its shares to get any cheaper while it’s doing so. Buying $2,500 worth of its shares five years ago would mean that your investment would now be worth roughly $4,845 after growing by 93.8%. Though the exact combination of catalysts that drove those returns won’t exist in the next few years, there are plenty of new and different catalysts that could easily lead to a repeat performance. In other words, now’s a smart time to buy, as the company’s future is bright.
If you’re a fan of getting dirt cheap groceries, clothes, kitchen items, health products, tires, and a ton of other consumer staples, Costco Wholesale (COST 2.23%) is probably a business you’re already familiar with. Its business model is to get consumers to pay a membership fee, which then allows them to buy consumer goods in bulk at the company’s warehouses at close to their cost.
Low prices mean that inventory turns over quite quickly; customers often pay for products before Costco itself has actually paid the manufacturer for it, which is impressive to say the least. To accomplish that, management focuses on stocking a small selection of products that it knows will sell rapidly and in large volume when priced aggressively. In the 12 months preceding its fiscal third quarter, it brought in $213.4 billion, marking a 114.9% increase over the last 10 years. In the same period, its trailing-12-month (TTM) net income rose by 212.8%, and the return of its shares skyrocketed by 535.1%.
Importantly, it didn’t need to pivot into new lines of business to get that growth; it just needed to keep executing on its core wholesaling activities. It’ll probably be able to do the same routine over the coming years, too, as macroeconomic headwinds from inflation will likely only push its customers to shop at its warehouses more than they normally would. In August, its net sales were 11.4% more than the month’s total from a year prior.
But its strong performance isn’t a recent phenomenon. If you invested $2,500 in Costco five years ago, you’d be sitting on around $7,400 today after a gain of about 196%. In the next five years, its returns might not be as impressive, as the economic conditions moving forward will be quite different from those of the recent past. Still, if consumers keep flocking to its warehouses and its offerings remain a good deal for them, its shares will likely keep outperforming the market with ease.
And all of the above means Costco stock is an especially attractive purchase right now, as many other businesses are scrambling to survive the anticipated difficulties ahead and facing falling earnings instead of growing even faster.