Two Relentless Stocks Worth Purchasing and Maintaining for the Following Decade
What links Apple (AAPL shedding 2.62%) and Vertex Pharmaceuticals (VRTX rising 0.76%)? A superficial examination suggests little commonality. One is a tech titan, while the other operates in the biotech sector.
Yet, they share a significant trait: they've left their long-term investors delighted. Over a decade, both Apple and Vertex Pharmaceuticals have outperformed the market, and anticipation lingers that they can maintain delivering impressive returns for the next 10 years and longer.
1. Apple
Apple faces several hurdles – including a sales dip in China, probes by lawmakers and regulators regarding potentially anti-competitive practices, and the widespread belief that the iPhone is no longer its major growth engine. Still, the company's shares have galloped 27% this year, in step with the broader market.
Several factors contribute to Apple's superior yearly performance, aspects which could foster substantial growth over the next decade.
Firstly, Apple finally ventured into artificial intelligence (AI) with the debut of Apple AI, a suite of features incorporated in some of its latest devices. This could ignite a streak of hardware upgrades as Apple's devoted aficionados race to obtain these snazzy new functions.
But Apple's AI journey isn't over. As CEO Tim Cook mentioned during the fiscal fourth-quarter earnings call in October: "This is merely the beginning of what we believe generative AI can achieve, and I couldn't be more enthused about the future."
Secondly, Apple's financials remain commendable, with its services segment performing exceptionally well. In its fiscal Q4 ending September 28, total revenue inched up 6% year-over-year to $94.9 billion, while services revenue surged by 12% year-over-year to $25 billion. Apple boasts an installed base of over 2 billion devices and more than 1 billion paid subscriptions across the wide range of services it provides. Though services accounted for only 26% of total revenue, they represented 42% of the company's gross margin in the quarter.
Progress in this sector will significantly influence Apple's revenue and, notably, its margins and bottom line. While the company's challenges are genuine, its impressive track record, robust core business, innovative prowess, and annual billions in free cash flow make it an excellent long-term holding.
Also, don't overlook the dividend. Over the past decade, Apple has boosted its payouts by an astonishing 112%. Reinvesting the dividend can significantly amplify the long-term returns of those who choose to do so.
2. Vertex Pharmaceuticals
Vertex Pharmaceuticals is reinventing itself. Over the last decade, the biotech has primarily relied on drugs that treat the underlying causes of cystic fibrosis. Though it maintains a monopoly in this market, management deemed it prudent to expand its offerings, considering other pharmaceutical companies could eventually develop competing therapies for the rare lung disease.
Last year, Casvegy, a gene-editing treatment Vertex developed with CRISPR Therapeutics, was approved by the Food and Drug Administration for patients with two rare blood diseases. Vertex Pharmaceuticals also has a potential pain medicine being considered for U.S. approval. And its pipeline includes a potential medicine for APOL-1-mediated kidney disease and another for IgA nephropathy (another kidney disease), both in phase 3 trials. Furthermore, it's working on a potential functional cure for type 1 diabetes.
Meanwhile, its cystic fibrosis segment remains robust. In the third quarter, Vertex Pharmaceuticals' revenue climbed by 12% year-over-year to $2.77 billion. The company is also on the verge of securing approval for a newer, improved cystic fibrosis triple-drug treatment.
Although there's some room for expansion in Vertex's primary market, its portfolio will undergo a complete metamorphosis in the next 10 years. A once-dominant franchise that continues to generate revenue will be strengthened by the inclusion of medications in various other indications. This could propel robust top-line growth for some time.
Vertex Pharmaceuticals has a history of innovation, so its long-term prospects remain promising.
- In terms of investing, Apple's recent foray into artificial intelligence through Apple AI and the promising growth of its services segment, which accounts for a significant portion of its revenue and gross margin, makes it an attractive long-term investment option for those seeking returns from the finance sector.
- Likewise, Vertex Pharmaceuticals' diversification beyond its monopoly in cystic fibrosis treatments, with potential approvals for new drugs in other indications like pain medicine, type 1 diabetes, and kidney diseases, position it as a promising investment opportunity in the biotech sector, offering significant growth potential for long-term investors.
