Thursday, June 13, 2024

Adding $1,000 to These Top Growth Stocks Would Be a Brilliant Move

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Looking for great stocks to buy in a bull market has its downsides. For instance, it’s harder to find deep discounts during a bull run. However, that’s not a big problem provided investors put their hard-earned money in companies that can perform well over the long run.

For those in the market for great companies with excellent prospects, let’s consider two options: Intuitive Surgical (NASDAQ: ISRG) and DexCom (NASDAQ: DXCM). Here is why putting $1,000 into one (or both) of these companies would be a great move.

1. Intuitive Surgical

Intuitive Surgical is a highly innovative medical device company best known for its da Vinci System, a robotic-assisted surgery (RAS) device. These machines allow physicians to perform minimally invasive surgeries that rely on small incisions and tiny instruments that can be manipulated with precision. These types of procedures have advantages over open surgeries, where doctors make large enough cuts to patients’ skin to have a full view of the internal organs involved in the procedures.

Minimally invasive surgeries result in less scarring, faster recoveries, and shorter hospital stays. Yet, as of last year, fewer than 5% of procedures that could be performed robotically were. That’s good news for Intuitive Surgical’s future: The company has miles of growth left ahead. In the meantime, it continues to strengthen its ecosystem. Intuitive Surgical ended 2023 with an installed base of 8,606 da Vinci systems, an increase of 14% year over year.

The company’s revenue of $7.1 billion increased by 14.5% year over year, while its adjusted earnings per share (EPS) of $5.71 jumped by 22% compared to 2022. Intuitive Surgical did encounter some issues in recent years, including pandemic-related decreases in procedure volume and the rise of weight-loss medicines last year that could decrease the demand for weight-loss surgeries. However, neither obstacle should matter much over the long run.

The pandemic was an exceedingly rare event, and, at any rate, Intuitive Surgical has bounced back. All the outbreak did was create a backlog of elective surgeries waiting to be performed. “Elective” here doesn’t mean “optional.” It simply means “can be scheduled in advance.” A mastectomy to treat breast cancer counts as an elective surgery. That’s why pandemic-related troubles won’t haunt Intuitive Surgical forever.

And while the increased popularity of GLP-1 medicines like Ozempic is having an impact, Intuitive Surgical estimates that weight-loss surgeries make up between 4% and 5% of total procedures worldwide. Given the massive whitespace remaining in the RAS market, that won’t matter too much over the next 10 years and beyond. The stock has crushed the market over the past decade and can do it again.

With $1,000, investors can get two shares of the company with plenty of change left.

2. DexCom

DexCom, another medical device marker, focuses on developing products that help diabetes patients. The company’s suite of continuous glucose monitoring (CGM) systems allows those with diabetes to track their blood sugar levels practically in real time. DexCom’s G6, one of its top products, can make measurements as often as every five minutes. By contrast, blood glucose meters are manually operated, use painful fingersticks, and only tell patients’ blood glucose levels at a specific time.

It’s no wonder that CGM devices have gained significant traction in recent years. They are the more convenient option and also lead to better health outcomes for diabetes patients. As one of the two leaders in the CGM space, DexCom’s revenue and earnings have grown rapidly. Last year, the company’s top line of $3.62 billion increased by 24% year over year. The adjusted EPS of $1.52 was up 74.7% compared to the previous fiscal year.

DexCom is also supposed to be struggling due to increased reliance on weight-loss medicines popular among diabetes patients. Their success will decrease the need for CGM devices, or so the argument goes. However, that argument is almost certainly off the mark. As DexCom argues, physicians prescribe GLP-1 therapies in combination with CGM gadgets for best results. These are complementary products that help diabetes patients live their healthiest lives.

DexCom’s future is safe, especially considering that more than half a billion adults worldwide now have diabetes, just 1% of whom use CGM. A substantial percentage of this population is beyond DexCom’s reach right now since they are located in developing countries. However, the company has long sought to expand its footprint. Last year, DexCom finally entered the Latin American market through Argentina.

At any rate, there is plenty of growth left even within DexCom’s existing addressable market, including in the U.S., one of the more penetrated CGM regions. In short, DexCom can continue riding the wave of the CGM revolution for years. The stock should deliver excellent returns along the way.

Investors can get their hands on eight shares of the company with $1,000 at current levels.

Should you invest $1,000 in Intuitive Surgical right now?

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Prosper Junior Bakiny has positions in Intuitive Surgical. The Motley Fool has positions in and recommends Intuitive Surgical. The Motley Fool recommends DexCom. The Motley Fool has a disclosure policy.

Adding $1,000 to These Top Growth Stocks Would Be a Brilliant Move was originally published by The Motley Fool

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