I think the stock market’s valuation has become frothy. And I’m in good company; Warren Buffett’s actions show that he shares this opinion. The legendary investor continues to be a net seller of stocks, and has amassed a record-high cash stockpile for Berkshire Hathaway. As I wrote recently, Buffett is being fearful while others are greedy.
Does this mean there aren’t any good picks for investors right now? Not at all. Some stocks aren’t priced at a premium. Here are three no-brainer stocks to buy before the end of 2024.
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Let’s first get the bad news for BioNTech(NASDAQ: BNTX) out of the way. Sales of the COVID-19 vaccine that the biotech company developed with Pfizer aren’t anywhere close to where they used to be. But I don’t think their joint COVID vaccine is a key reason to buy BioNTech stock soon.
Instead, I view BioNTech’s pipeline as a potential gold mine. The company is evaluating four programs in late-stage testing, two of which are cancer therapies. It has 13 candidates in phase 2 testing. All but one of them targets some type of cancer.
BioNTech expects to launch its first cancer immunotherapy within the next two years, and it’s aiming to win “10 indication approvals in oncology by 2030.” Will the biotech innovator be able to deliver on these goals? I don’t know. However, the market is pricing BioNTech stock as if it has no chance of success.
Don’t believe me? BioNTech’s enterprise value (which factors in market cap, cash position, and debt) is around $11 billion, according to LSEG. But BioNTech should generate at least $2.6 billion in sales this year. That equates to a price-to-sales ratio of 4.2, well below the average P/S of roughly 7.5 for the biotech industry (which includes many companies with no product on the market).
I think this valuation gap implies that BioNTech’s pipeline is viewed as practically worthless. But I suspect that it’s worth quite a lot, and that this presents a big opportunity for investors.
Buying Vertex Pharmaceuticals(NASDAQ: VRTX) sooner rather than later should also be a smart move. In January 2025, Vertex hopes to win approvals from the the U.S. Food and Drug Administration (FDA) for two new products. An FDA decision on the vanzacaftor triple-drug combo in treating cystic fibrosis (CF) is anticipated early in the month. The agency should render its verdict on suzetrigine in treating acute pain by Jan. 30.
The vanzacaftor triple offers a more convenient dosing (once daily) than Vertex’s blockbuster drug Trikafta. It’s also more powerful than Trikafta, and has a significantly lower royalty burden. I fully expect the combo to become Vertex’s most profitable CF therapy ever.
Suzetrigine is a non-opioid pain therapy. That’s enormously important, considering the side effects and addictive potential of opioids. Vertex is already preparing for a quick launch of suzetrigine, assuming it wins approval (which I think is highly likely). It’s also evaluating the drug in a phase 3 study for treating diabetic peripheral neuropathic pain, and a phase 2 study for treating lumbosacral radiculopathy (lower back and hip pain).
Vertex’s pipeline features two late-stage programs targeting kidney diseases. Inaxaplin is a potential treatment for APOL1-mediated kidney disease, which affects more patients globally than CF. The company views povetacicept as a “pipeline in a product,” initially targeting the chronic kidney disease IgA nephropathy.
Last, but not least, Vertex is moving forward with its goal to cure type 1 diabetes. Islet cell therapy VX-880 is already in phase 3 testing, although its use could be limited due to the requirement for patients to receive immunosuppressants. But VX-264 doesn’t require immunosuppressants, and isn’t too far behind in phase 1/2 studies.
Meanwhile, Vertex continues to enjoy a monopoly in treating the underlying cause of CF. And its stock trades at 25 times forward earnings. I think that’s a bargain valuation given the company’s tremendous growth prospects.
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Keith Speights has positions in Berkshire Hathaway, Pfizer, and Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Berkshire Hathaway, Pfizer, and Vertex Pharmaceuticals. The Motley Fool recommends BioNTech. The Motley Fool has a disclosure policy.
