Bull Market and beyond: 2 stocks waiting to rise

The bull market of recent years has enjoyed an enviable head start. Despite some bumps along the way, many quality stocks posted robust performances as overall investor sentiment improved. While concerns about the global economy, inflation, interest rates and other factors could mean volatility for companies in a wide range of sectors, quality businesses have what it takes to persist through market highs and lows.

If you’re looking for top stocks to invest in and hold for the long term, here are two contenders that could offer generous long-term returns.

1. Vertex Pharmaceuticals

Vertex Pharmaceuticals (VRTX -2.72%) hasn’t seen the wild price gains that other stocks have had in the new bull market, but the stock is trading up about 17% since the start of this year. It is only slightly higher than his performance S&P 500 in the same period.

The company cut its teeth on cystic fibrosis drugs, generating billions in revenue as well as profits to become the market leader in this segment of the rare disease drug space.

Vertex is now also known for Casgevy, which received regulatory green light in the US late last year and became the first approved CRISPR therapy in history. This gene-editing therapy is a unique functional cure for two rare blood disorders that are estimated to have a maximum sales potential of billions of dollars annually. Rollouts are underway worldwide, including in the US, the European Union and the United Kingdom.

Vertex is also eyeing several other potentially successful drug launches over the next few years. A notable example is a new cystic fibrosis therapy that management believes could set a new standard of care for the genetic disease. Vertex already dominates the cystic fibrosis drug market with its existing therapies, including Trikafta – its flagship drug. Trikafta brought in nearly $9 billion in sales in 2023 alone.

The new drug is a triple combination therapy that only needs to be taken once a day instead of twice like Trikafta and has shown better sweat chloride reduction. (A person with cystic fibrosis is unable to process and absorb chloride from sweat effectively because of defects in proteins found in various tissues, including the sweat glands.)

The peak revenue potential for the new triple combination therapy could be close to $10 billion annually, according to some estimates. The US Food and Drug Administration is reviewing Vertex’s new drug application for the therapy in patients 6 years of age and older, with the review period expected to end in January 2025.

UK and EU regulators are also reviewing the drug for approval. This therapy may not only benefit existing customers taking Vertex therapies or others new to the cystic fibrosis patient population. There are more than 6,000 patients who have had to discontinue a drug from the current portfolio.

Vertex is also working on a cystic fibrosis therapy Modern which could extend its coverage to another 5,000 patients who cannot even take their current range of drugs.

Outside of cystic fibrosis, Vertex is working on a stem cell therapy that could be a potential functional cure for type 1 diabetes and has already filed regulatory filings for the non-opioid drug suzetrigin as a treatment for moderate to severe pain.

There’s a lot to like about where Vertex is as a business and where it’s going. The company had nearly $10 billion in cash and investments on hand at the end of the most recent quarter and $2.7 billion in revenue in the three-month period alone.

While most of that total came from Trikafta (which has patent exclusivity until 2037), Vertex is working to diversify its product portfolio and revenue streams to move away from reliance on the drug. Investors looking to benefit from this growth trajectory may find now is a good time to get a piece of the action.

2. Pinterest

Pinterest (PINS -0.46%) it’s still trading up nearly 16% from a year ago, though shares have been in the red since early 2024. The photo-sharing and discovery platform has faced fluctuating growth over the past few years, after an earlier surge of the pandemic.

With so many people stuck at home, surfing the web and shopping online, advertisers used capital in waves during those days of the pandemic. Pinterest’s user growth has exploded, and its platform — which serves as prime advertising real estate in a number of industries — has benefited significantly.

Then the bottom fell out. Changing shopping habits and a tough economy have forced many advertisers to cut spending, and the Pinterest platform has faced unfavorable growth comparisons with unusual periods of expansion. User growth has also slowed overall, with people returning to the world, and a drop in ad spending has sharply reduced revenue while reducing profitability.

So where do things stand now? The macro environment is still challenging for both small and large brands, but the trajectory of ad spend has recovered from the downturn and is expected to continue to accelerate.

Pandemic levels of growth shouldn’t be expected, but Pinterest saw steady user and revenue growth along with a tidy profit under generally accepted accounting principles (GAAP) in its most recent quarter.

Looking at results for the second quarter of 2024, revenue rose 21% year-over-year to $854 million, while Pinterest’s monthly active users grew 12%. The company now has 522 million people worldwide using its platform for inspiration every month. Profits for the three-month period totaled $9 million, with adjusted earnings of $180 million.

Pinterest had about $2.8 billion in cash and investments on hand at the end of the last quarter. And management is forecasting third-quarter revenue to rise 16% to 18% year-over-year, falling between $885 million and $900 million.

With Pinterest’s goal of making every pin shoppable and user growth steadily increasing, there’s plenty of room for this business to thrive, even if growth is slower than in the past several years. Investors may find that buying even a few stocks at a discount could be a good move.