Many investors are worried about a resurgence of turbulence in the markets and what that could mean for stocks in the weeks and months ahead. But great businesses can withstand the test of time and provide meaningful portfolio returns. Concerns about the U.S. economy, its impact on the global economy, and the trickle-down impact of inflation on businesses across industries are legitimate.
At the same time, if you’re investing your cash into excellent companies and intend to hold on to your positions for years at a time, these short-term movements needn’t deter you from your overarching financial goals. On that note, here are two monster growth stocks to consider adding to your portfolio right now.
1. AbbVie
AbbVie (NYSE: ABBV) has dealt with some short-term headwinds in recent quarters due to the loss of patent exclusivity on Humira. The drug was once the world’s top-selling drug and the crown jewel of this healthcare company’s portfolio.
While the entry of generics into the market has certainly driven a decline in Humira sales, AbbVie has other winners in its portfolio that are slowly but surely offsetting the outcome of these changes. Bear in mind, pharmaceutical companies tend to be far less cyclical than other businesses. However, they do endure changing business cycles as new drugs are developed and approved, and older, top-selling drugs give way to competition.
The average period of patient exclusivity for newly approved drugs is around 12 years, but this can vary based on the specific product in question. AbbVie delayed patent expiration on Humira for years, eventually extending its patent exclusivity period to around two decades before it was finally forced to contend with the impact of biosimilars.
Fast-forward to the second quarter of 2024, and the impact of AbbVie’s broad portfolio of other blockbuster drugs is taking hold despite waning sales of Humira, driving revenue and profits upward. Worldwide net revenue in the three-month period totaled $14.5 billion, up approximately 4% from one year ago, a healthy increase for a business at its level of maturity.
This performance was driven by robust growth in its oncology and neuroscience drug portfolios of 11% and 15%, respectively. Blockbuster immunology drugs like Skryizi and Rinvoq, which saw revenue rise by respective rates of 45% and 56% in the quarter from the year-ago period, were also heavy hitters here.
The company is very profitable. In the first half of 2024, AbbVie brought in net earnings of approximately $2.8 billion, a 21% increase from the first half of 2023. And over the trailing 12 months, AbbVie has brought in operating cash flow of about $19 billion with free cash flow in the ballpark of $20 billion.
As a long-standing dividend payer, AbbVie has increased its dividend by over 285% since it spun off from Abbott Laboratories over a decade ago. It currently boasts a forward annual dividend yield of around 3.1%, roughly double that of the average stock trading on the S&P 500, with a forward annual dividend rate of $6.20 per share.
If you’re looking for a top-notch income-producing healthcare stock to add to your portfolio, AbbVie might be worth a long, hard second look.
2. Cava Group
Cava Group (NYSE: CAVA) owns and operates a chain of Mediterranean style fast-casual restaurants across the U.S. Shares have been doing exceptionally well recently, with the stock soaring by an eye-popping 200% since January.
The company only went public in June 2023, but its fast-growing business that is already generating profits seems to be attracting increased interest from investors. Now, it’s important to look beyond share price increases and at the underlying business to see what’s happening.
In the second quarter of 2024, Cava’s revenue jumped 35% year over year to $231 million. The restaurant stock also opened 18 net new restaurants in the three-month period, which resulted in Cava ending the quarter with 22% more restaurants in its portfolio than the same time last year.
Same restaurant sales popped by more than 14% from the year-ago quarter, while restaurant level profits soared 37% from the comparable period in 2023. About 36% of Cava’s orders in the quarter came from digital sales.
From a profitability perspective, Cava reported just shy of $20 million in net income in the three-month period. That was about 3 times higher than its net income just one year ago. The company is also cash-flow-positive. Net cash from operations totaled around $49 million in the second quarter of 2024, while free cash flow came to around $23 million.
Cava Group, like other members of the restaurant industry, is going to experience a certain level of cyclicality and vulnerability to changing consumer spending patterns. However, the company’s fast-casual dining experience can provide a more affordable and accessible (not to mention slightly healthier) option to consumers, which can be particularly appealing when wallets are constrained.
If you have a well-diversified portfolio and the risk appetite to invest in restaurant stocks, Cava looks like a solid choice to capitalize on the growth in the fast-casual segment.
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Rachel Warren has positions in AbbVie. The Motley Fool has positions in and recommends Abbott Laboratories. The Motley Fool recommends Cava Group. The Motley Fool has a disclosure policy.
2 Monster Stocks You Can Buy Right Now Before They Surge Even Higher was originally published by The Motley Fool
