Investors looking for stocks that can go up want to turn their heads toward the medical technology industry. Demand for devices that enable minimally invasive surgical procedures and remote monitoring of patients with chronic conditions is on the rise.
With roughly 10,000 baby boomers reaching the age of Medicare eligibility every day, companies like Abbott Laboratories(NYSE: ABT) and Intuitive Surgical(NASDAQ: ISRG) can rely on a steadily growing customer base. Both of these businesses have their best days ahead, but which is best for your investment goals?
Why Abbott Laboratories could be a great investment
If you want a stock for uncertain times, Abbott Laboratories could set your mind at ease. This constantly shifting collection of healthcare businesses hasn't missed a quarterly dividend payment in nearly a century. Plus, it's increased its payout for 51 consecutive years. At recent prices, the stock offers a 2.1% yield.
COVID-19 tests were a huge windfall for Abbott, but it didn't last. If you ignore the effects of declining COVID-19 test sales, total revenue in the first half of the year is up 10% year over year.
Soaring sales of the company's constant blood glucose monitor (CGM) will help the conglomerate push its big needle forward. Sales of FreeStyle Libre devices in the U.S. pushed diabetes-care sales 24.6% higher in the first half.
Abbott's medical device sales could soar further, thanks to the recent clearance of the Lingo wearable device by the U.S. Food and Drug Administration. Lingo is designed for general consumers who want to track their blood glucose levels, and Lingo Rio is for adults with Type 2 diabetes who manage their conditions without insulin.
There are lots of ways that Abbott could push its dividend payout higher. In the first half of 2024, the company announced 10 new growth opportunities that arose from new product approvals or new indications for existing products. With medical devices driving growth in the present and newly approved devices that could keep producing gains for at least a decade, this is a great stock for cautious investors to buy now and hold for the long run.
Why Intuitive Surgical could be a great investment
Intuitive Surgical doesn't offer investors a dividend -- but it could. This was the first company to market robotic-assisted surgical systems, and it's still the largest. The company placed 341 new systems in hospitals around the world during the second quarter, which raised its base of installed systems to 9,203 at the end of June.
Medtronic and Johnson & Johnson are both medical technology businesses with robot-assisted surgical systems of their own. Intuitive Surgical looks like a good stock to buy despite the competition because the major players in this niche industry aren't in a hurry to compete against each other for specific procedures. Moreover, retraining surgeons and other staff to use new equipment is an expense most hospitals would like to avoid.
Intuitive Surgical grew second-quarter procedure volume by 17% year over year. Sales of consumable devices that need to be replaced between procedures grew at nearly the same pace to reach $1.24 billion in the second quarter.
Intuitive Surgical's business is growing fast. With an early lead in the robot-assisted surgery industry, it could continue growing by double-digit annual percentages for years to come.
Before jumping up to fill your portfolio, though, you should know that it's been trading for around 68 times forward-looking earnings expectations. A sky-high earnings multiple means investors who buy at recent prices could suffer heavy losses if procedure volumes or sales decelerate during the next several years.
The better buy now
If you're nearing retirement or simply hate to lose money, Abbott Laboratories is the better stock to buy now. A diverse operation gives it a great chance to continue raising its dividend at a mid-single-digit annual percentage for at least another decade.
For those of you unphased by risk, Intuitive Surgical is the better buy now. The stock trades at a high multiple, but the company's first-mover advantage gives it a chance to overcome its valuation and deliver much larger gains over the long run.
Should you invest $1,000 in Abbott Laboratories right now?
Before you buy stock in Abbott Laboratories, 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 Abbott Laboratories 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 $700,076!*
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. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of July 22, 2024
Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories and Intuitive Surgical. The Motley Fool recommends Johnson & Johnson and Medtronic and recommends the following options: long January 2026 $75 calls on Medtronic and short January 2026 $85 calls on Medtronic. The Motley Fool has a disclosure policy.
