Don't think for a second that all blue-chip stocks are stuffy and deliver sluggish growth. Some of them are exactly the opposite of that description.
These three blue-chip stocks recently hit 52-week highs, with two of the three reaching all-time-high marks. Here's why Abbott Labs (NYSE: ABT), Novartis (NYSE: NVS), and Stryker (NYSE: SYK) are performing so well -- and whether any of these stocks are buys right now.
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1. Abbott Labs
Abbott Labs is the best performer of the three blue-chip stocks on this list, with its shares up 24% over the last 12 months. You only have to look at Abbott's 2018 financial results to know why the big medical-device maker is doing so well. The company increased its earnings per share (EPS) by 15%, generated over $6 billion in cash flow, and boosted its dividend by 14%.
It would be a stretch to say that only one or two products led to Abbott's success. After all, the company markets a long list of products across multiple categories. And all four of its business segments generated year-over-year revenue growth in 2018. However, there are two products that warranted special attention from Abbott CEO Miles White in the company's Q4 conference call in January: FreeStyle Libre and Alinity.
FreeStyle Libre is Abbott's continuous glucose monitoring (CGM) system that doesn't require finger sticks. Sales for the system more than doubled last year to top $1 billion. Alinity is Abbott's suite of diagnostic products that have been launched in Europe and some international markets but not yet in the U.S. White stated in Abbott's Q4 call that Alinity's "rollout in Europe has been exceptional."
Novartis' shares have gained 13% over the last 12 months and now trade at the highest level since January 2018. The big pharma company's momentum kicked into gear last July after Novartis reported solid second-quarter results.
While Novartis claims a whopping 15 blockbuster drugs on the market, its two fastest-rising stars right now are immunology drug Cosentyx and heart-failure drug Entresto. Last year, sales for Cosentyx soared by 37% to $2.8 billion, making the drug Novartis' No. 2 best seller overall. Entresto topped $1 billion in sales for the first time, with revenue more than doubling from the previous year.
Acquisitions have also fueled Novartis' rise. The company closed its purchase of French drugmaker Advanced Accelerator Applications in early 2018. It followed up in April with the acquisition of gene therapy biotech AveXis. Novartis also announced last October that it was buying cancer-focused biotech Endocyte.
After finishing 2018 with a puny 1% gain, medical-device giant Stryker's shares have jumped 23% so far in 2019. The stock is now near its 52-week and all-time-high marks.
The primary catalyst for Stryker was the company's great Q4 update in January 2019. Stryker CEO Kevin Lobo stated on the company's conference call that the company "had an excellent finish to 2018 with the best organic sales growth in a decade, and strong adjusted earnings performance."
Two areas look especially strong for Stryker. The company's medical-surgical unit is firing on all cylinders, with endoscopy instruments experiencing notably strong sales growth. Stryker's acquisition of K2M also boosted the company's neurotechnology and spine growth.
Are they buys?
In my view, one of these three blue-chip stocks is a solid pick, and two are maybes to keep on your radar. Let's start with the ones to watch.
Novartis has a lot going for it with Cosentyx and Entresto, new products like migraine drug Aimovig, and a promising pipeline. However, it will likely take a few years for the drugmaker's pipeline to really begin contributing. In the meantime, Novartis faces headwinds for older products, including cancer drug Gleevec and multiple sclerosis drug Gilenya. My view is to hold off on Novartis for now, but it could be a stronger choice in the not-too-distant future.
I plan to closely watch Stryker as well. The company has some new products launching this year that should drive revenue higher. I think that Stryker is close to being a stock to buy, but I'm in wait-and-see mode for now.
My favorite of these three stocks is Abbott. I think that FreeStyle Libre should continue to perform really well, especially with a new version on the way. I also expect the U.S. launch for Alinity to be a great success for Abbott. With Abbott's increasing dividend, my take is that it could deliver market-beating total returns in the future.
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