Technology stocks aren’t giving investors a reason to smile these days. The Nasdaq has dropped more than 5% over the past three weeks. And investors are starting to think more and more about when the next market crash may happen.
What to do in this kind of scenario? Buy more stocks. But not just any stocks. Take advantage of the dip to pick up shares of strong companies in a “safe haven” sector. Healthcare is my favorite. These companies usually sell products considered essential. So even in a turbulent environment, they have a good chance of maintaining revenue. Here are two to check out on the dip.
Intuitive Surgical (NASDAQ:ISRG) is the global leader in robotic surgery. Last year, the company held nearly 80% of the market, according to a report by BIS Research. The company sells the Da Vinci surgical system that’s used for various minimally invasive procedures. Surgeons use the Da Vinci in areas including general surgery, gynecology, and urology.
Intuitive’s annual revenue has soared to more than $4 billion over the past five years. And annual profit has surpassed $1 billion. Intuitive’s earnings suffered last year as hospitals were forced to cancel many procedures to make room for coronavirus patients. However, this is only likely to happen during a pandemic — not during other market downturns. So, I expect Intuitive to continue growing revenue even when the stock market crashes or the economy suffers.
The company recently reported an 18% increase in first-quarter revenue to more than $1.2 billion. Profit climbed 36% to $426 million. And, importantly, the company shipped 298 Da Vinci systems for a 26% increase year over year. New system orders are key to maintaining Intuitive’s market share. But system sales isn’t Intuitive’s only revenue driver. In fact, the company actually generates more money through the sales of instruments, accessories, and services.
Intuitive’s shares are down more than 5% since the start of the month. And year to date, they’re little changed. With postponed surgeries being rescheduled and hospitals returning to normal business, revenue and profit should benefit in Intuitive’s upcoming earnings reports. That means this dip in share price may not last very long.
Abbott Laboratories‘ (NYSE:ABT) diversification makes it a great healthcare stock to own in good times and bad. The company sells medical devices, diagnostics, nutrition products, and pharmaceuticals. Diversification is the reason why the pandemic only hurt part of Abbott’s business. Some lab tests were postponed as labs reduced certain operations. And the postponement of certain surgeries weighed on medical device sales. But Abbott’s work to develop several coronavirus diagnostics compensated.
Looking ahead, Abbott continues to benefit from its coronavirus diagnostics and the return to normal for sales of other products. In the first-quarter earnings report, the company reported COVID-19 testing sales of more than $2.2 billion. At the same time, overall sales climbed about 35% to more than $10 billion. And sales in each of the four business units grew. Abbott predicts 35% growth in earnings per share to at least $5 for the full year.
Abbott now is thinking of the next stage of the coronavirus health crisis. And that has to do with the return of travel. The company has partnered with United Airlines to make Abbott’s rapid self-test one travelers can pack — then use prior to their return from an international trip. That way, travelers don’t have to search for a testing center before flying home.
Abbott’s shares are down about 6% from their April high. If Wall Street is right, they may climb 16% from today’s level in the coming 12 months. And they’re trading at 36 times trailing twelve-month earnings. That’s down from more than 50 back in February. All of this means right now is a great time to pick up shares of this solid healthcare company — and hold on to them well beyond the next market crash.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.