Got $1,000? 2 superior growth stocks to buy and hold forever

In the stock market, ups and downs are inevitable. But long-term investors should not get involved in them. Instead of focusing on those short-term swings, these investors should put their money into great businesses and focus on multi-year investment horizons.

By owning stocks of fantastic companies for years or decades and adding to your positions when you have more capital to deploy, you can generate healthy and sustainable portfolio growth. With that in mind, here are two top growth stocks to consider if you have $1,000 of cash on hand that you’re ready to invest right now.

1. Eli Lilly

Eli Lilly (LLY -3.47%) is one of the oldest names in the pharmaceutical industry, with a vast portfolio of drugs for indications ranging from oncology to immunology to weight management to neurology. It has had a banner year as continued successes of its established treatments and added tailwinds provided by newly approved products drive its revenues and profits skyward. The stock is up about 52% year-to-date and about 61% from a year ago.

Newer additions to its portfolio such as GLP-1 (glucagon-like peptide-1) drugs, Zepbound (for weight management) and Mounjaro (for type 2 diabetes) are driving its growth story right now. So are core products such as the cancer drug Verzenio, the plaque psoriasis drug Taltz and Jardiance, which is approved for multiple uses, including type 2 diabetes and chronic kidney disease.

Earlier this year, Eli Lilly also won long-awaited regulatory approval for Kisunla, a treatment for early symptomatic Alzheimer’s disease. Forecasts suggest that the drug will have peak annual sales of $8 billion.

This month, the Food and Drug Administration also approved Eli Lilly’s Ebglyss for patients over 12 years of age with moderate to severe atopic dermatitis. New data published by Eli Lilly from two randomized, double-blind, placebo-controlled phase 3 trials testing the drug found that Ebglyss controlled disease for up to three years in more than 80 percent of adults and teenagers. According to an estimate from GlobalData, the drug could add $3.4 billion in annual revenue to Eli Lilly’s top line by 2030.

In the second quarter of 2024, revenue rose 36% to $11.3 billion, while GAAP (generally accepted accounting principles) profits rose 68% year-over-year to just 3 billion dollars. Gross margin rose 40% to $9.1 billion. Management also raised the company’s full-year revenue estimates by $3 billion, and now expects its top line to come in at $45.4 billion to $46.6 billion. The upper end of this range would equate to a 37% increase.

Eli Lilly is also a favorable choice for income investors, given that the company has a track record of regular dividend growth. It has increased its payout for 10 consecutive years, and while at the current share price the $5.20 annual dividend yields less than 1%, the company maintains a payout ratio of about 60%. For dividend-seeking investors as well as those looking for top healthcare stocks, Eli Lilly looks like a compelling choice.

2. Lululemon

Lululemon Athletica (LULU 4.16%) Shares are trading down about 45% since the start of this year, despite the company’s continued demonstration of resilience in a challenging consumer spending environment. The retailer operates in a crowded space but remains a market leader in the sports niche.

Of course, its growth has slowed somewhat, partly because of higher prices, which have dampened consumers’ appetite for spending. It has recently underperformed sales in America, and customer response to its new Breezethrough legging line was so unfavorable that management quickly abandoned stores. Management has indicated that they plan to relaunch the Breezethrough material with revised garment designs in the future. Meanwhile, the company has plenty of core apparel products for both men and women that are driving sales growth.

Some of the challenges it faces, such as macroeconomic difficulties, can be seen more as short-term headwinds. While Lululemon’s recent product launch hasn’t been what management had hoped for, overall revenue is still growing and the company remains profitable. Longtime chief product officer Sun Choe left the company in May, leading Lululemon to restructure the executive team responsible for product development and design.

Instead of finding a single person to replace Choe, Lululemon put global creative director Jonathan Cheung in charge of design, innovation and product development and named chief brand officer Nikki Neuburger as the new head of merchandising operations , shoes and products. Lululemon also remains adamant that it is on track to hit the milestones set out in its Power of Three x2 growth strategy, including a goal for the company to grow its revenue to $12.5 billion by 2026.

In the first half of 2024, Lululemon reported net income of $4.6 billion, up 9% from the first half of 2023. The company also reported net income of $714.3 million dollars during that period, a 13% year-over-year increase. In the second quarter, net income rose 7% to $2.4 billion, while comparable sales rose 3% in constant dollars.

Even though comparable sales in its Americas region were down 3% year-over-year (2% on a constant currency basis), international sales were up 19% (22% on a constant currency basis). Gross profit rose 9%, while gross margin rose 80 basis points to just 60%. Meanwhile, the company ended the period with about $1.6 billion in cash and cash equivalents on hand after generating net cash from operations of about $571 million in the first six months of the year.

While the stock is trading about 45% below its 52-week high, the company’s balance sheet still appears to be in solid shape, and its growth prospects are far from evaporated. While its industry is competitive and fragmented, Lululemon has the footprint to continue expanding even as new rivals grab market share. Its low valuation could make it a tempting buy for more risk-tolerant investors.