Last month, investors received a not-so-subtle reminder that the stock market can (and does) move in both directions. In a span of two days, the iconic Dow Jones Industrial Average, tech-heavy Nasdaq Composite, and broad-based S&P 500 lost in the neighborhood of 6% to 7% of their respective value. This swoon also erased all year-to-date gains in the S&P 500, which is certainly a wake-up call after the benchmark index gained better than 31% in 2019, inclusive of dividends paid.
While factors such as the spread of COVID-19, the lung-focused novel coronavirus that’s infected more than 80,000 people worldwide, and plunging bond yields clearly have investors on edge, there also the solace in knowing that the stock market tends to rise over the long-term. In fact, all 37 official stock market corrections since the beginning of 1950 in the S&P 500 have been put firmly in the rearview mirror by bull-market rallies. This means that investors who choose to buy and hold high-quality businesses have a very good chance of making money over the long run.
What great companies should you be considering for your portfolio this March? Below you’ll find three top stocks that could easily slide in as core holdings today, and likely for many years to come.
The first top stock to consider buying is robotic-assisted surgical system developer Intuitive Surgical (NASDAQ:ISRG). Following the recent stock market swoon, shares of Intuitive Surgical are hovering at a 3.5-month low, which offers long-term investors the opportunity to buy a truly dominant medical-device innovator for an exceptionally attractive price.
What Intuitive Surgical brings to the table are a host of competitive advantages. For one, you can add all of its peers’ surgical systems combined and you still wouldn’t come close to the total number of da Vinci surgical systems installed worldwide. Since these systems tend to be pricey ($0.5 million to $2.5 million each), and quite a bit of time and effort goes into training surgeons to use them, Intuitive Surgical also has little issue with customer churn. In other words, hospitals and surgical centers that purchase the da Vinci system tend to deliver consistent cash flow and long-term organic growth without the fear that they’ll jump ship to a competing system.
Perhaps more important is that Intuitive Surgical’s higher-margin revenue streams are growing into a larger percentage of total sales. Although the da Vinci system costs quite a bit, the margins on these systems aren’t great since they’re costly and complex to manufacture. Rather, the company generates the bulk of its margins from selling instruments with each procedure and regularly servicing its installed systems. As of the fourth quarter, two-thirds of the company’s sales were now derived from these higher-margin streams.
Also consider that Intuitive Surgical has a long runway with which to expand the use of its da Vinci system. Already a dominant player in gynecology and urology surgeries, management sees ample potential in thoracic, colorectal, and general surgery indications moving forward.
Double-digit sales and profit growth per year should be the expectation from shareholders moving forward.
Continue reading at The Motley Fool for the last 2 stocks, and the full article.