Beating the S&P 500 over five years or more is notoriously tricky. Even highly trained hedge fund managers often struggle to do it. If you're hoping to pull it off, it might be worth considering companies with track records of above-average returns that still have the strengths that led to their past successes. These conditions are neither sufficient nor necessary to beat the market, but looking at these factors is a decent place to start.
In that spirit, let's discuss two companies that meet those criteria: HCA Healthcare(NYSE: HCA) and Vertex Pharmaceuticals(NASDAQ: VRTX). Here's why their stocks could deliver better returns than the S&P 500 through 2030.
1. HCA Healthcare
HCA Healthcare is a leading hospital chain in the U.S., with 186 hospitals and over 2,000 care centers of various types. The hospital-chain business is a hard industry to crack. The challenges include managing dozens of medical facilities -- an expensive proposition -- and building and maintaining relationships with physicians, patients, and third-party payers.
HCA Healthcare does these things as well as any of its competitors. In fact, the company's market share has generally increased over the years, indicating that it performs better than most of its peers. Its 24% market share in 2012 rose to 27% about a decade later. That included the early pandemic years when its business experienced severe disruptions. It also dealt with economic issues, including the need to rely on more expensive contract labor, which harmed its bottom line.
HCA Healthcare has navigated all that pretty well, though. Unsurprisingly, the company has delivered strong financial results along with its market-share gains:
HCA Revenue (Quarterly) data by YCharts.
What exactly fuels the company's success? Investing in its facilities, updating equipment, and offering cutting-edge services are all part of its strategy. HCA plans to do more of the same through 2030, while targeting a 29% share of the market by then. While the past is no guarantee of future success, HCA Healthcare has a strategy that has been proven to work -- and help it increase its position in a competitive and highly regulated industry.
In my view, the company is likely to perform through 2030 about as well as it has in the past decade.
2. Vertex Pharmaceuticals
Strong financial performances are important in the biotech industry, as in every other. However, drugmakers must also show solid clinical and regulatory progress to impress investors. We can expect Vertex Pharmaceuticals to excel in both categories through 2030.
The drugmaker's portfolio of medicines that treat cystic fibrosis (CF), a rare condition that affects internal organs, is still going strong. Vertex is the only game in town: It markets the only medicines that treat the underlying causes of CF.
The company's progress in this field is the biggest reason it has generally performed well in the past 10 years:
VRTX Revenue (Quarterly) data by YCharts.
The net loss in the second quarter was due to an acquisition worth almost $5 billion.
The company is now moving beyond CF. Its newest approval is Casgevy, a gene-editing therapy for a pair of rare blood disorders: sickle cell disease and beta-thalassemia. Gene-editing treatments take time to administer, but in the next few years, Casgevy, which boasts blockbuster potential, should start meaningfully contributing to Vertex's top line and improving its financial results.
On the regulatory front, Vertex Pharmaceuticals is awaiting approval for two brand-new products: A new combination therapy for CF and a treatment for acute pain. Both should earn the green light next year.
Given Vertex's pipeline, there should also be some clinical wins in the next few years. The company is currently running a phase 3 study for inaxaplin in APOL-1 mediated kidney disease. It has several programs in early stages, including an investigational therapy for type 1 diabetes that has already shown some promise.
Vertex Pharmaceuticals has enough going on to allow the stock to deliver better-than-average returns through the end of the decade. The company looks like an attractive option for long-term investors.
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Prosper Junior Bakiny has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends HCA Healthcare and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
