Warren Buffett's Bluntest Warning Yet — and 3 Stocks Built to Survive It
Warren Buffett has delivered warnings to Wall Street in recent years as the S&P 500 soared to new highs. In some cases, the warning came in the form of an increasing cash pile. For more than a dozen quarters, Buffett, at the helm of Berkshire Hathaway, was a net seller of stocks.
Today, Buffett is in retirement, so he no longer holds the role of Berkshire Hathaway chief executive officer. But he is the chairman emeritus and still participates in investment discussions. And he is also clearly present at shareholder meetings and speaks openly about investing, as he’s done throughout his career. During the latest meeting, in May, he delivered his bluntest warning yet.
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“We’ve never had people in a more gambling mood than now,” he told CNBC during an interview. Buffett referred to individuals rushing into short-term options and betting on markets rather than focusing on long-term investing. This behavior is risky for those taking part in it, and it may represent a risk for the market as well, leading to an eventual drop.
Now here are two bits of good news. First, the S&P 500 and quality stocks have always recovered after market turmoil. And second, certain stocks are built to survive troubled times. The pharma and biotech industries are a great place to look for such companies since patients always need their treatments, regardless of the economic backdrop. Here are three top stocks to consider.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals (NASDAQ: VRTX) is the global leader in cystic fibrosis (CF) treatment, and this business has helped the company generate billion-dollar revenue over time. The biotech‘s strong intellectual property translates into leadership here through at least the late 2030s. Vertex makes CFTR modulators, or treatments designed to correct the malfunctioning protein that causes symptoms of the disease.
In recent years, Vertex has expanded into other treatment areas, winning approval for a gene editing therapy for blood disorders and a non-opioid drug for pain. And Vertex continues to expand, with the most recent effort being the purchase of Crinetics Pharmaceuticals, a player in the endocrine disorders space. The deal brings a commercialized product and pipeline candidates, and it’s expected to add to non-GAAP operating income in 2029.
The combination of Vertex’s leading CF business and these recent expansions offers investors stability and potential for growth in any economic environment.
2. Eli Lilly
Eli Lilly (NYSE: LLY) dominates one of the highest-growth pharmaceutical areas around, and that’s the weight loss drug market. The company sells tirzepatide, commercialized as Mounjaro for type 2 diabetes and as Zepbound for weight loss. And each of these products is bringing in blockbuster revenue.
In the recent quarter, they generated more than $14 billion on total revenue of $23 billion. We could see additional growth in the coming years as Lilly recently launched its first weight loss pill, Foundayo, and is bringing other promising weight loss candidates through the pipeline.
Meanwhile, Lilly also sells a broad range of other drugs across treatment areas, so it doesn’t depend uniquely on the weight loss market for growth. Still, this market, on track to reach nearly $100 billion by then end of the decade, very likely will represent a major growth driver for Lilly for years to come.
3. AbbVie
AbbVie (NYSE: ABBV) is the maker of one of the world’s best-selling drugs over time, the immunology drug Humira. The pharma giant lost exclusivity on Humira in recent years and has proven its ability to beat that challenge, thanks to the strength of the rest of its immunology portfolio.
Its newer immunology drugs, Rinvoq and Skyrizi, are growing in the double digits and bringing in blockbuster revenue. In the latest quarter, they delivered 24% growth each to revenue of $2.5 billion and $5.5 billion, respectively.
AbbVie sells other leading drugs across treatment areas, from Botox in the aesthetics portfolio to Vraylar for depression in the neuroscience portfolio.
Investors will also like AbbVie for its status as a Dividend King, having lifted its payments for more than 50 consecutive years. So with AbbVie, investors gain access to reliable revenue and passive income, making it a fantastic stock to own during any market environment.
Should you buy stock in Vertex Pharmaceuticals right now?
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Adria Cimino has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends AbbVie, Berkshire Hathaway, Eli Lilly, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
Warren Buffett’s Bluntest Warning Yet — and 3 Stocks Built to Survive It was originally published by The Motley Fool