No matter how tough it can be to hold onto your investments when they are losing value during bear markets, they always end, and bull markets are liable to kick off shortly thereafter. In fact, investors who keep buying shares of quality companies when the mood on Wall Street is sour are the ones who tend to get a lot richer when it turns. If you want to be one of them, now’s the time to be buying.
In my view, there are a couple of exceptionally strong growth stocks that are particularly worth considering right now. Both companies have upcoming or ongoing catalysts that should lead to their making more money tomorrow than they do today — and both are likely to continue winning in the long term.
The reason AbbVie (ABBV -1.01%) is worth purchasing before the next bull market is that its valuation is a decent bargain relative to other businesses in the pharmaceutical industry. Its price-to-sales (P/S) ratio is 4.6, and its price-to-earnings (P/E) ratio is 22.9. In contrast, the pharma industry’s average P/S is 5.1, and its average P/E is 24.6. That means you should get a bit more bang for your buck with AbbVie’s shares than with shares of one of its competitors.
Warren Buffett’s contention that “it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price” is important to keep in mind here. High-quality growth stocks are rarely steeply discounted. And there’s little chance that AbbVie’s shares will get any cheaper when the next bull market rolls around and valuations expand. That’s doubly true when considering what AbbVie is going to be doing over the next two years.
Simply put, AbbVie is trading at a weaker valuation than the average pharma business today because it’s expecting to have low top-line growth or even top-line contraction through 2024 due to the expiration of U.S. exclusivity protection for its top-earning drug, Humira. Its annual revenue, which topped $58 billion in 2022, could drop to as low as $53 billion in 2024, per estimates by Wall Street analysts.
But given the company’s plans to start more than 110 new clinical studies in 2023, and with more than 240 clinical trials ongoing, its period of revenue stagnation is likely to be brief.
Its executives anticipate that growth will resume with gusto in 2025 and continue at a brisk pace through the end of the decade, powered potentially by up to 11 new regulatory approvals that could happen through the end of 2024. And if investors buy shares soon, they’ll profit even more from the boost granted by the next bull market when it arrives.
2. NextEra Energy
NextEra Energy (NEE -1.62%) also offers a stellar, long-term investing thesis. Its fleet of power plants is quite diverse, generating energy from natural gas, solar, coal, and nuclear facilities. And over the last 10 years, its adjusted earnings per share grew at a compound annual rate of roughly 10% — the fastest rate of profit expansion out of the 10 largest power generation companies by market capitalization.
In that decade, its shares delivered a total return of 442%, smashing the broader market’s return of 227%, and there’s reason to believe that NextEra’s outperformance will continue whether or not there’s a new bull market.
Thanks to the worldwide transition to green energy sources and the falling costs of producing power from renewables, management is anticipating around 7% in annual adjusted earnings per share growth from now through at least 2026. And because demand is projected to consistently rise for electricity in the coming decades, expanding its top line shouldn’t pose a problem for the company in the long term.
Now is a good time to consider the stock. If a bull market kicks off, it would likely drive the price of NextEra’s shares upward, which will reduce its dividend yield. At the moment, its forward yield is 2.2%. That passive income, along with the company’s anticipated earnings growth, makes the stock attractive right now.
Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool has a disclosure policy.