When the stock market is highly volatile, many investors flock to assets that offer stability but dismal growth prospects. However, you don’t necessarily have to sacrifice growth for safety.
Three Fool.com contributors believe they’ve identified relatively safe growth stocks in the healthcare sector that you can buy and hold. Here’s why they picked Amgen (AMGN 0.64%), Eli Lilly (LLY 1.34%), and Vertex Pharmaceuticals (VRTX 1.52%).
A growth stock that’s cheap, pays dividends, and is full of potential
David Jagielski (Amgen): Given the fragility of the markets of late, investors should be paying close attention to valuations, especially for growth stocks. Drugmaker Amgen may be an optimal one to be hanging on to right now, due to the strong mix of value, growth, and dividends it offers.
The stock trades at a modest 14 times its estimated future earnings (based on analyst expectations). It pays a dividend that yields 3.3%, and it has a diverse business with some promising long-term growth prospects. It has dozens of phase 3 trials currently ongoing, spanning multiple therapeutic areas, including neuroscience, inflammation, oncology, and others.
One drug that investors are watching particularly closely is MariTide, a GLP-1 treatment for obesity that in a phase 2 trial helped participants lose 20% of their body weight. It only needs to be taken on a monthly basis, which can make it a much more attractive option for patients than the weekly GLP-1 injections currently approved on the market.
In 2024, Amgen reported $4 billion of profit on sales totaling $33.4 billion, for a solid profit margin of 12%. It also generated free cash flow totaling $10.4 billion.
Year to date, the biotech stock has risen by more than 12% and has been outperforming the broader market. That’s a trend that could continue in the future, given its strong growth prospects and fundamentals.
An opportunity to buy the dip on this terrific growth stock
Prosper Junior Bakiny (Eli Lilly): Due to President Trump’s macroeconomic policies, major indices have declined significantly this year. It might be hard to consider any stock “safe” in this environment, but some corporations, like Eli Lilly, seem relatively safe for those focused on the long game.
Eli Lilly’s revenue has been growing at no less than 20% year over year since mid-2023, which is outstanding for a pharmaceutical giant. Though it owes this performance to its diabetes and weight management medicines, it would be a mistake to reduce Eli Lilly to these areas — important though they may be.
In the past few years, the drugmaker has earned approvals for key medicines in other fields that will help drive top-line growth for a while. These include Kisunla in Alzheimer’s disease; Ebglyss, an eczema treatment; and ulcerative colitis therapy Omvoh. Further, Eli Lilly has an incredibly deep pipeline.
Yes, here too, the company’s work in diabetes and anti-obesity is grabbing much of the attention. But once again, Eli Lilly’s business goes beyond that. The company is making strides in oncology, while its early-stage investigational gene therapy for deafness looks promising.
Eli Lilly should maintain strong financial results and its excellent dividend program even in this shaky environment. The pharmaceutical leader has increased its payouts by 200% in the past decade. Growth- and income-oriented investors will find what they seek here, even as broader equities continue to drop. If anything, now is as good a time as ever to initiate a position in Eli Lilly.
A virtual monopoly with multiple growth drivers
Keith Speights (Vertex Pharmaceuticals): Most biotech stocks are anything but safe. However, Vertex Pharmaceuticals is an exception. The company commands a virtual monopoly in treating the underlying cause of cystic fibrosis (CF). Vertex is a cash cow, raking in $11 billion in sales last year. Even better, though, this big biotech innovator has multiple growth drivers.
One of those growth drivers is in Vertex’s core CF market. The company won U.S. regulatory approval of Alyftrek in December 2024. Alyftrek is as effective as Vertex’s top-selling CF drug, Trikafta, with a more convenient once-daily dosing. Vertex also doesn’t have to pay as much in royalties on the new drug as it does on its older CF therapies.
I’m even more bullish about Vertex’s opportunities beyond CF, though. Momentum is picking up for its gene-editing therapy, Casgevy. Vertex recently launched non-opioid painkiller Journavx, which I predict will easily become another blockbuster drug for the company.
More good news could be on the way over the next few years, too. Vertex’s pipeline features four programs in phase 3 clinical testing. The company hopes to pick up a new indication for Journavx in treating painful diabetic peripheral neuropathy. It has two experimental drugs targeting kidney diseases: inaxaplin for APOL1-mediated kidney disease, and povetacicept for IgA nephropathy. Vertex is also evaluating zimislecel in late-stage testing as a potential cure for several kinds of type 1 diabetes.
Maybe some of these candidates will be unsuccessful. Even if that’s the case, though, Vertex is a relatively safe growth stock to buy and hold thanks to its already approved therapies’ strong growth prospects.