The state of the U.S. stock markets is perilous. During the first month of the year, bargain seekers bid up a broad range of growth equities, but these same equities, on average, struggled to maintain these monthly gains during February.
Uncertainty about the future of inflation, U.S. interest rates, and the global economy is the central problem at hand. In the best case, the Federal Reserve’s aggressive plan to raise interest rates will slowly cut consumer demand without causing a recession.On the other hand, evidence from the past shows that a Federal Reserve that is too powerful can hurt the economy as a whole.
The idea is that another severe decline in U.S. stock values in 2023 is not out of the question. Listed here are three top-tier growth stocks to buy aggressively if the overall market declines.
1. Eli Lilly
Eli Lilly (LLY, 0.28%) is a turbocharged large-cap pharmaceutical stock. In spite of its decision to lower insulin costs by 70% (a product that accounts for around 15% of the drugmaker’s overall revenues), Lilly is still predicted to experience solid top- and bottom-line growth in the coming years. The reason for this is the company’s innovation engine.
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By investing substantially in research and development, Lilly has established a powerful diabetic franchise with Mounjaro, Trulicity, and Jardiance as its flagship products. In addition, it offers high-quality products in immunology with Taltz and cancer with Verzenio. Lilly is now testing numerous potential blockbuster drugs for atopic dermatitis, immunology, and Alzheimer’s disease. As a result, Lilly is anticipated to experience high double-digit sales growth in 2024.
The flaw in Lilly’s investment thesis is its exorbitant valuation. Despite a decline in its share price in 2023, Lilly’s stock is still priced at more than 36 times forward profits. The peer group average price-to-earnings ratio is approximately 15. In conclusion, Lilly should be one of the best stocks to purchase during a market correction.
2. Madrigal Pharmaceuticals
Madrigal Pharmaceuticals (MDGL, -2.29%) is a late-stage biopharmaceutical developer. Resmetirom, a potential treatment for non-alcoholic steatohepatitis (NASH), is central to the company’s value proposition. In December 2022, Madrigal revealed that resmetirom surpassed expectations in a crucial NASH trial. In the first half of 2023, the business intends to seek rapid approval in this context from the Food and Drug Administration (FDA).
If Madrigal gets the first FDA approval for NASH, it’s likely that the business will be a good one to buy.NASH could bring in tens of billions of dollars in drug sales, but big pharma hasn’t been able to develop its own NASH prospects in the last ten years.Even though this stock is subject to a substantial level of regulatory risk, Madrigal’s shares may be worth purchasing on a drop.
3. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX, -0.16%) is a titan of value generation. Last year, while other growth stocks were declining, Vertex’s stock soared by an astounding 31.5%. Due to the company’s high-growth cystic fibrosis (CF) business, investors remained committed to this eminent biotech stock in the past year. In 2022, Vertex’s CF medication revenues increased by 18% to $8.9 billion.
Vertex’s strong patent portfolio in CF and first-mover advantage are also expected to keep the company’s top line growing for the rest of the decade.Yet, the pharmaceutical company is on the verge of introducing other growth drivers. Exa-cel, a treatment for blood disorders developed in partnership with CRISPR Therapeutics, might be Vertex’s next blockbuster product. Recently, the two businesses filed for export approvals in the United States, the United Kingdom, and the European Union.
Similar to Lilly, Vertex’s stock is similarly valued at a premium. With a trailing earnings multiple of 22.6, Vertex’s shares are among the most expensive in the pharmaceutical business. This is not to imply that this premium valuation is unwarranted, but this biotech stock would be a much more enticing investment at a trailing earnings multiple of less than 20.