The stock market has had a roaring first half of 2024. As summer begins and many are planning summer vacations, planning for a better financial future should also be part of the equation.
Building a portfolio that stands up to the test of time won't happen overnight. You don't need to be rich to get started, either. Instead, steadily investing spare cash -- money that you don't need for bills or other near-term financial obligations -- and consistently putting that capital into quality stocks in a wide range of market environments can help you generate and maintain optimal returns.
If you have $1,000 to invest right now, here are two no-brainer stocks to buy with at least part of that amount.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals (NASDAQ: VRTX) is the leader in cystic fibrosis therapeutics and has built a multibillion-dollar, extremely profitable business on the basis of that franchise. The underlying strength of its business has laid the groundwork for a robust pipeline and management's vision for the future, which includes expanded leadership in the rare disease drug market.
The company, along with its co-development partner CRISPR Therapeutics, garnered the distinction of being the first in the world to receive the regulatory green light for a CRISPR therapy late last year. The gene-editing therapy, Casgevy, is designed to be a one-time functional cure for both sickle cell disease and transfusion-dependent beta-thalassemia.
While only specific cohorts of patients with these diseases qualify for now, and the process of administering the therapy is lengthy because it involves editing the patient's own blood stem cells, this looks to be a huge win for the company over the long term.
Vertex is taking on most of the costs associated with developing and marketing Casgevy, but it's also retaining 60% of the profits. Bear in mind, Casgevy is projected to hit more than $1 billion in annual sales by the year 2027, with peak annual sales potential estimated to be in the ballpark of $2.2 billion.
Vertex is also working on stem cell treatments for type 1 diabetes, along with various candidates that target the underlying cause of rare diseases such as Duchenne muscular dystrophy and APOL1-mediated kidney disease. One of the candidates that investors should be watching closely is suzetrigine, Vertex's non-opioid pain drug. Suzetrigine is being studied in moderate to severe acute pain, as well as for patients with diabetic peripheral neuropathy.
The U.S. Food and Drug Administration has already granted Vertex's rolling new drug application submission for suzetrigine in moderate-to-severe acute pain, and that process was expected to conclude in Q2. Vertex intends to create a new class of medicines that relieve various pain ailments without the addictive qualities of opioids. Management targets its addressable patient population just in the moderate-to-severe pain category in the U.S. at approximately 80 million patient lives.
In the company's most recent earnings call, management detailed the mix of prescription settings in over one billion calendar days of patient treatment. In that period of time, 15% of patients are prescribed and dispensed drugs for acute pain in a hospital, 35% are prescribed at discharge, and 50% are prescribed in physicians' offices. Management believes that the earliest uptake of suzetrigine, once it hits the market, will be at discharge, but it's gearing its long-term focus on the institutional settings.
This is because approximately two-thirds of acute pain patients are served in an institutional setting, with just around 2,000 institutions accounting for about 50% of all acute pain prescriptions nationwide. As a result, Vertex not only has a specific target market to set its sights on, but also benefits from the explosive growth in demand for viable acute pain treatment options. On a global scale, estimates show that one in five individuals is suffering from chronic pain.
Vertex Pharmaceuticals appears to have a superior growth runway ahead, and now could be just the beginning stages of the company's potential. The company is already coming from a position of strength and is extremely profitable. It brought in net income of about $1.1 billion in the first quarter of 2024, a 57% increase from one year ago. That figure was on revenue of $2.7 billion. For investors searching for a top healthcare stock to buy and easily hold for five to 10 years, Vertex looks like a wise contender to consider.
2. Sweetgreen
Sweetgreen (NYSE: SG) is a fast-casual restaurant chain that originally started as the brainchild of three Georgetown graduates in 2007. The company is known for its salads and warm bowls, which include a variety of gluten-free and vegan options.
The company currently has 225 locations spanning the U.S. and plans to achieve 23 to 27 net new restaurant openings in 2024. One core aspect of Sweetgreen's expansion strategy are its robot kitchens, called Infinite Kitchens.
Sweetgreen purchased a robot kitchen start-up called Spyce in 2021 and opened its first Infinite Kitchen using this technology in 2023. Like other restaurant chains, the cost of hiring workers is one of the most significant areas of capital intensity for Sweetgreen. The company plans to launch seven to nine new Infinite Kitchen locations in 2024, including a few retrofits of existing kitchens to robotic ones.
Now, that doesn't mean that the human element is out of the picture entirely. With an Infinite Kitchen, workers are still preparing the ingredients, and are there to help customers who have questions. However, the technology helps to automate the assembly of ingredients before the bowl goes back into the hands of workers, then to the customer.
Fast-casual chains and restaurants, in general, are known for more modest profit margins. Sweetgreen already has fairly healthy restaurant-level profit margins in the ballpark of 18%, but these early Infinite Kitchen locations have achieved profit margins of about 28%.
In the first quarter of 2024, Sweetgreen delivered total revenue of about $158 million, a 26% increase from the same quarter in 2023. The percentage of revenue derived from purchases made through digital channels was 59%, while 33% of revenue came through Sweetgreen's own digital channels.
The company is not yet profitable, so that is a point for investors to be aware of before investing in the business. Sweetgreen appears to be slowly inching closer to profitability, though, as its net losses are narrowing and it reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $100,000 with trailing-12-month operating cash flow of approximately $33 million in Q1.
Sweetgreen's need to get to consistent profitability hasn't dissuaded investors from piling into the stock this year. Shares are up approximately 60% from one year ago, and up around 120% from the beginning of 2024.
Now, that run-up isn't a reason in and of itself to buy shares of the restaurant stock. However, if you like the value proposition of a popular salad chain that has solid margins, steady revenue growth, is working to aggressively cut costs through innovative strategies like robot kitchens, and is steadily moving toward profitability, Sweetgreen could be an option for your portfolio.
Should you invest $1,000 in Vertex Pharmaceuticals right now?
Before you buy stock in Vertex Pharmaceuticals, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vertex Pharmaceuticals wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $692,784!*
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 has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of July 22, 2024
Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CRISPR Therapeutics and Vertex Pharmaceuticals. The Motley Fool recommends Sweetgreen. The Motley Fool has a disclosure policy.
2 No-Brainer Growth Stocks to Buy With $1,000 Right Now was originally published by The Motley Fool