In the stock market, ups and downs are inevitable. But long-term investors shouldn't get wrapped up in them. Instead of focusing on those short-term oscillations, these investors should put their cash into great businesses and focus on multiyear investing horizons.
By holding onto shares of fantastic companies for years or decades, and adding to your positions when you have more capital to deploy, you can generate healthy, sustainable portfolio growth. With that in mind, here are two superior growth stocks to consider if you have $1,000 in available cash that you're ready to invest right now.
1. Eli Lilly
Eli Lilly (NYSE: LLY) is one of the oldest names in the pharmaceutical industry, with a vast portfolio of drugs for indications ranging from oncology to immunology to weight management to neurology. It has had a banner year as the continued successes of its established treatments and the added tailwinds provided by newly approved products are driving its revenue and profits skyward. The stock is up by roughly 52% year to date, and up about 61% from one year ago.
Newer additions to its portfolio such as GLP-1 (glucagon-like peptide-1) drugs Zepbound (for weight management) and Mounjaro (for type 2 diabetes) are driving its growth story right now. So are mainstay products like cancer drug Verzenio, plaque psoriasis drug Taltz, and Jardiance, which is approved for multiple uses, including type 2 diabetes and and chronic kidney disease.
Earlier this year, Eli Lilly also earned a long-awaited regulatory approval for Kisunla, a treatment for early symptomatic Alzheimer's disease. Forecasts suggest the drug will have peak annual sales in the ballpark of $8 billion.
This month, the Food and Drug Administration also approved Eli Lilly's Ebglyss for patients 12 and older with moderate-to-severe atopic dermatitis. In new data released by Eli Lilly from two randomized, double-blind, placebo-controlled phase 3 trials testing the drug, it was found that Ebglyss controlled the disease for up to three years in more than 80% of adults and adolescents. According to an estimate from GlobalData, the drug could add $3.4 billion in annual revenue to Eli Lilly's top line by 2030.
In the second quarter of 2024, revenue increased 36% to $11.3 billion, while GAAP (generally accepted accounting principles) profits jumped by 68% from the year-ago period to just shy of $3 billion. Gross margin rose 40% to $9.1 billion. Management also raised the company's full-year revenue guidance by $3 billion, and now expects its top line to land in the ballpark of $45.4 billion to $46.6 billion. The high end of that range would equate to growth of 37%.
Eli Lilly is also a favorable choice for income investors, given that the company has a track record of regularly boosting its dividends. It has increased its payouts for 10 consecutive years, and while at the current share price, the $5.20 annual dividend yields less than 1%, the company maintains a payout ratio of approximately 60%. For dividend-seeking investors as well as those looking for a top healthcare stock, Eli Lilly looks like a compelling choice.
2. Lululemon
Lululemon Athletica (NASDAQ: LULU) stock is trading down roughly 45% since the start of this year, despite the continued demonstration of the company's resilience in a challenging environment for consumer spending. The retailer operates in a crowded space but remains a market leader in the athleisure niche.
Admittedly, its growth has slowed somewhat, partially a function of higher prices that have dampened consumers' appetite for spending. It recently saw weaker sales performance in the Americas, and customer response to its new line of Breezethrough leggings was so unfavorable that management rapidly pulled the line from stores. Management indicated that they plan to rerelease the Breezethrough fabric with revised clothing designs in the future. In the meantime, the company has plenty of its mainstay apparel products for both men and women driving sales growth.
Some of the challenges it's facing, such as the macroeconomic difficulties, can be viewed more as short-term headwinds. While Lululemon's recent product rollout was not what management had been hoping for, overall revenue is still on the upswing and the company remains profitable. Longtime Chief Product Officer Sun Choe departed the company in May, leading Lululemon to restructure the executive team in charge of product development and design.
Rather than finding a single person to replace Choe, Lululemon put Global Creative Director Jonathan Cheung in charge of design, innovation, and product development, and named Chief Brand Officer Nikki Neuburger as the new head of merchandising, footwear, and product operations. Lululemon also remains firm that it is on track to reach the milestones set in its Power of Three x2 growth strategy, among them a goal for the company to grow its revenue to $12.5 billion by 2026.
In the first half of 2024, Lululemon reported net revenue of $4.6 billion, up 9% from the first half of 2023. The company also reported net income of $714.3 million in that period, a 13% year-over-year increase. In the second quarter, net revenue rose 7% to $2.4 billion, while comparable sales rose 3% on a constant dollar basis.
Even though comparable sales in its Americas region declined by 3% from the year-ago period (2% on a constant-currency basis), international sales rose by a mouth-watering 19% (22% on a constant-currency basis). Gross profit rose by 9% while gross margin rose by 80 basis points to just shy of 60%. Meanwhile, the company ended the period with approximately $1.6 billion in cash and cash equivalents on hand, having generated net cash from operations of about $571 million in the first six months of the year.
While the stock is trading about 45% below its 52-week high, the company's balance sheet still looks to be in solid shape, and its growth prospects have far from evaporated. While its industry is competitive and fragmented, Lululemon has the footprint to continue expanding even as new rivals draw market share. Its discounted valuation could make it a tempting buy for more risk-tolerant investors.
Should you invest $1,000 in Eli Lilly right now?
Before you buy stock in Eli Lilly, 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 Eli Lilly 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 $760,130!*
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 September 23, 2024
Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica. The Motley Fool has a disclosure policy.
