Some investors look at a glass of water as half-empty, while hardcore pessimists believe that the glass is drizzled with arsenic. I’m neither.
You can count me as one who constantly looks at the glass of water as half-full.
Admittedly, it has been challenging to continue being optimistic, given the current conditions of the stock market. Some stocks in my portfolio have suffered a beating, too. Nevertheless, I’m still optimistic about the next 10 or 15 years.
Why? Because this horrible bear market has presented us with one of the most exciting and promising investment opportunities in over a decade.
If you don’t believe me, think back to 2009. Unquestionably, that was an incredible year to buy stocks. The S&P 500 index skyrocketed over 320% from January 2009 to today. Meanwhile, the Nasdaq 100 index soared 830%.
However, there's a crucial detail: this realization comes in retrospect. Remember, around early 2009, the Great Recession was still well underway. It didn’t feel like any investment was a promising opportunity at that time.
Stocks only showed signs of bottoming out at the very end of the first quarter of that year, and no one could confidently say when the bear market would end.
Fast forward to 2022. While there’s still no official word on whether we are in a recession, analysts have insisted that we’re well on our way to another one soon.
Although the present situation is obviously distinct from what happened in 2009 because of the COVID-induced recession and the continuation of the 2020 bear market, I fully believe that investors will look back to this period and realize that it’s the prime time to buy stocks.
So, how can investors make the most of this buying opportunity?
First, don’t focus on waiting for the market to bottom. A better way to deal with the situation is to determine the stocks of companies with solid core businesses that currently trade reasonably priced (or if you can find them, bargain) valuations.
Second, choose stocks that you can buy incrementally. It’s definitely possible that the market will fall even more. If that happens, investing gradually or in stages rather than dropping all your money into stocks at a single time could be a failsafe strategy.
Third, be patient. This tip cannot be highlighted enough. It’s critical to provide stocks with sufficient time to run. Investors who bought stocks early in 2009 and sold them by 2010 or 2011 missed out on most of the best and longest bull run in history.
The good news is that many excellent stocks meet the criteria mentioned above.
A particular name stands out in the biotechnology and healthcare industry: Vertex Pharmaceuticals (VRTX).
Unlike other businesses, Vertex has been trouncing the broader market this year, climbing by over 35% year to date. More importantly, the company’s pipeline of candidates looks even brighter.
One of the reasons this biotechnology giant is performing well is its monopoly of the cystic fibrosis (CF) market. In the third quarter of 2022, Vertex’s CF programs generated $2.33 billion in sales and $931 million in profits.
It doesn’t end there, as Vertex has plans to maximize its monopoly of the CF market.
More therapies are under development to target more patients in this sector, which means Vertex would eventually become its own biggest rival. Needless to say, this will make its hold in the CF market much stronger.
In terms of adding more monopoly money to its portfolio, Vertex has been working on a treatment for APOL1-mediated kidney disorder. To date, there remains no therapy for this condition.
On top of these, Vertex has been collaborating with CRISPR Therapeutics (CRSP) to develop treatments for two rare blood disorders. Given the timeline released by both companies, these candidates should be ready for regulatory approval by December 2022 or early 2023.
Another promising candidate in its pipeline is the non-opioid pain treatment VX-548 for moderate to severe acute pain. Ultimately, Vertex’s goal is to offer this alternative to end the opioid epidemic.
Meanwhile, its acquisition of Viacyte has catapulted Vertex into one of the Type 1 diabetes market leaders.
Overall, Vertex’s forward earnings multiple of 20 may not look all that attractive, but the biotech’s growth prospects are up-and-coming. Hence, I view this stock as a bargain at the moment.
Again, Vertex is only one of the examples of companies that could be an excellent investment in this bear market. The healthcare and biotechnology sector has more great stocks to buy in this crisis. Indeed, the glass of water is most definitely half-full.
