SPECIAL REPORT The Top 7 Stocks for 2024

Stable Giants: 3 Bigwig Biotech Stocks for Consistent Returns


  • The biotech sector is still down on the year while the broader marker is up, but these three biotech giants will likely have consistent returns
  • Thermo Fisher Scientific (TMO) is the largest lab supplier in the world, and benefits from being the go-to supplier for many labs who don’t have time to shop around.
  • Eli Lilly (LLY) has bet big on diabetes drugs and has been rewarded with huge increases in revenue and profit
  • Novo Nordisk (NVO) has wildly popular weight-loss drugs and is even trialing them to see if they cure such diverse diseases as Alzheimer’s disease.
Biotech Stocks - Stable Giants: 3 Bigwig Biotech Stocks for Consistent Returns

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Biotech stocks have had a rough post-pandemic. In a year where the S&P500 is up more than 10% year to date, the biotech sector is still negative to flat. Some of this may come from mean reversion, the biotech sector went wild during the pandemic search for COVID cures and vaccines. But it also shows that fundamentally many investors remain skittish about the sector as a whole.

For those investors, these stable, large-cap biotech stocks may be for you. Some of the biggest names in biotech have shown consistency year after year. That consistency is likely to remain going forward. These biotech stocks are also giants in their field, dominating the mindshare of consumers and able to hire the best employees. Loyal customers and employees are two key ingredients for stable growth.

Because biotech stocks will bounce back. Some biotech stocks will remain very volatile, especially small biotechs relying on clinical trials. However, the broader sector is still poised for consistent growth. As our population ages and healthcare becomes a larger share of our GDP, the biotech sector must grow to keep up with demand. As that happens, these big biotech stocks will ride the wave of the broader marker just fine.

So for investors looking for safer biotech stocks, ones which can bring good returns but with lower volatility than the small caps, here are three bigwig biotech stocks to buy now.

Thermo Fisher Scientific (TMO)

A Thermo Fisher Scientific sign out front of an office in Silicon Valley, California.
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The largest lab supplier in the world is Thermo Fisher (NYSE:TMO). They supply everything a lab would ever need, from large instruments to small consumables. Their suite of reagents, instruments, and services covers the entire spectrum of biology, chemistry and medicine. They’re even a big player in the growing field of laboratory robotics.

One of the reasons Thermo Fisher has been so successful and will likely remain so is the network effect. Every lab knows about them, and so whenever you want to buy anything at all, most lab’s first stop will be Thermo Fisher. Some companies specialize in antibodies, some companies specialize in separation chemistry, some companies specialize in DNA and RNA. Thermo Fisher provides all those things. So they have become the one-stop-shop for labs and lab managers, especially at small start-ups and academic institutions where purchases need to be made quickly. This network effect is hard for Thermo Fisher’s smaller companies to replicate, and so it will likely continue to contribute to their dominance even as smaller nimbler companies try to carve out their own niches.

Financially, Thermo Fisher has held up even as the broader sector has slowed down. Their Q2 2023 earnings report showed $10.7 billion in revenue and $1.4 billion in net income. Little changed year over year from $11 billion in revenue and $1.7 billion in net income in Q2 2022. I know from my own experience that the broader slowdown is hitting academic labs hard, and tough choices are being made over where to spend increasingly scarce resources. But so far, few labs can afford to cut out Thermo Fisher. As the sector rebounds, Thermo Fisher will rebound too, proving itself one of the best big biotech stocks to buy right now.

Eli Lilly (LLY)

Eli Lilly and Company World Headquarters. Lilly makes Medicines and Pharmaceuticals XI
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Eli Lilly (NYSE:LLY)has had a very good 2023. Their stock price went over over 10% in a day when they released their Q2 2023 earnings report. That report showed revenue growing strongly year on year from $6.5 billion to $8.3 billion. And net income went up 85% year on year from $953 million to $1.763 billion.

Eli Lilly’s growth was driven by growth in all sectors of its drug portfolio, but especially the growth in its diabetes drugs. Total diabetes revenue grew from $3.4 billion in Q2 2022 to $5 billion in Q2 2023, the majority of revenue growth came from the diabetes sector alone. Drugs like Trulicity and Jardiance help control blood sugar. As our population becomes more obese year after year, these drugs will be increasingly necessary.

Eli Lilly is a drug stock par excellence. They have done an exceptional job at targeting the growing segment of consumer drug needs. As they are so big, they can play the averages on clinical trials. Small biotech companies can have wild swings on the results of a single trial, but for Eli Lilly no single trial will make or break the company. So as a big biotech stock, Eli Lilly can bring stability along with consistent gains.

If you want a biotech stock that you can buy and hold forever, Eli Lilly is a great option. They’ve chosen drug targets in a fast-growing sector, and they have clinical trials running to keep finding better treatments to many of the most common diseases out there. That makes them one of the best big biotech stocks to buy.

Novo Nordisk (NVO)

Novo Nordisk logo on a corporate building
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Novo Nordisk (NYSE:NVO) has been so profitable, it has fundamentally affected Denmark’s currency. With hit weight loss drugs like Wegovy, Novo Nordisk made more than 100 billion Danish Kroner in revenue in the first six months of 2023. Of course most of their sales are sold in countries with legal tender that isn’t Danish Kroner. So Novo Nordisk has to convert all its pounds, dollars, and euros into Kroner, which has affected Denmark’s exchange rate and even its interest rates.

However, central bank fun facts aside, Novo Nordisk is on a strong growth trajectory that is getting even stronger. Their earnings report for the first half of 2023 shows revenue growth of over 25% and net profit growth of nearly 50%. In clinical trials, they’re pushing ever forward with their biggest drugs. For example, the much-hyped Wegovy is in clinical trials to see if it can also treat Alzheimer’s disease. That trial still has 2 years left, but it shows that Novo Nordisk is still pushing boundaries in every direction. With drugs that already have FDA approval for one condition, it makes sense to test them for many others. And that’s exactly what Novo Nordisk is doing, finding every possible profit for its most successful drugs.

Weight loss drugs have long been seen as just snake-oil on daytime TV, but Novo Nordisk brought them to reality. And along with the other drugs in its pipeline, Novo Nordisk is one of the best big biotech companies to buy today.

On the date of publication, John Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Article printed from InvestorPlace Media, https://investorplace.com/2023/10/stable-giants-3-bigwig-biotech-stocks-for-consistent-returns/.

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