Santa Claus will soon be on the road delivering gifts to children around the world. But could the cheerful gift also do something for investors? The so-called “Santa Claus demonstrations” can take place towards the end of the year.
Three Motley Fool contributors believe they have identified fantastic stocks that could be in a good position to benefit from a Santa Claus rally. Here’s why they chose abbvie(NYSE: ABBV), Nordisk(NYSE: NVO)and Vertex Pharmaceuticals(NASDAQ: VRTX).
David Jagielski(Abbvie): Heading into the end of the year, one growth stock that could see a rebound is AbbVie. The pharmaceutical company has great long-term potential and may be one of the best stocks to buy as the year comes to a close. The stock has had a lukewarm year as its shares are up just 11% (as of Monday’s close), which pales in comparison to the S&P 500Most impressive 27% rally yet.
Investors have been bearish on the stock after the company announced that its schizophrenia drug emraclidine failed to meet its primary endpoint in Phase 2 trials, triggering a stock sell-off in November.
But that could create a great opportunity to buy shares at a discount right now, especially after it reported encouraging news from a different test. Earlier this month, the company announced positive results for tavapadon, which met primary and secondary endpoints in a Phase 3 trial for the treatment of early Parkinson’s. The company will file a new drug application next year, which could lead to another approval related to the disease. In October, regulators approved Vyalev, a treatment for advanced Parkinson’s disease.
Not every drug in AbbVie’s portfolio will be a hit. But it’s still a solid growth stock and investors seem overly pessimistic given the disappointing emralidine trial result. With more than 90 compounds in the pipeline, there will be good and bad results along the way.
There is good value here for investors who are willing to be patient. Trading at just 15 times estimated forward earnings for next year (according to analyst estimates), it may only be a matter of time before AbbVie stock starts rising again.
Prosper Junior Bakiny(Novo Nordisk): Several factors can cause a stock market rally late in the year, including optimism about the year ahead. It’s difficult to predict which companies (if any) will benefit from this through 2025, but Novo Nordisk is a good choice for several reasons. Let’s consider two. First, although it performed well in the first half of the year, the drugmaker has struggled since then. In the last six months, Novo Nordisk shares are down 24%.
This despite the company reporting strong revenue and profit growth thanks to its diabetes and obesity drugs. The market is arguably undervaluing Novo Nordisk. Second, the company could achieve significant clinical breakthroughs next year. Novo Nordisk has several late-stage programs in development. Perhaps it will release data on CagriSema, an investigational weight-loss drug that could generate $20 billion by 2030, according to some estimates.
Novo Nordisk could also publish results for semaglutide, the active ingredient in Wegovy and Ozempic, in the treatment of patients with Alzheimer’s disease and steatohepatitis associated with metabolic dysfunction, two areas with large unmet needs. Novo Nordisk’s relatively poor performance since June and the potential catalysts it could experience in 2025 could lead to a Santa Claus rally for the stock. However, even if not, the drugmaker is still one of the best options in the industry. Novo Nordisk is an innovative company that consistently generates strong financial results and has a deep and exciting pipeline.
Santa Claus rally or not, the company is worth investing in for the long term.
Keith Speights (Vertex Pharmaceuticals): Shares of Vertex Pharmaceuticals plunged on Thursday after the company announced results from a Phase 2 clinical study evaluating suzetrigine in the treatment of painful lumbosacral radiculopathy (LSR), a type of sciatica. However, I think a rebound is likely towards the end of the year.
On the one hand, in my opinion, the liquidation was exaggerated. Investors were concerned that suzetrigine would not perform statistically better than placebo in the Phase 2 study. Importantly, however, the non-opioid analgesic still met the study’s primary endpoint of pain reduction in the numerical pain rating scale (NPRS). Vertex plans to talk to regulators about advancing suzetrigine into late-stage trials for LSR.
It is not unusual for placebo response to be unexpectedly high in clinical trials of analgesics. Vertex post hoc analyzes suggested that a different trial design might better control this issue in phase 3 testing.
The bigger story for Vertex is that it expects not just one, but two approval decisions from the US Food and Drug Administration (FDA) in the coming weeks. The FDA is scheduled to announce its decision on approving the three-drug combination vanzacaftor for the treatment of cystic fibrosis by January 2, 2025. The agency set a PDUFA date of January 30, 2025 for its decision on Suzetrigine in the treatment of acute pain. . (By the way, the drug’s late-stage results in this indication seemed excellent, with no red flags.)
I await approval from the FDA for both medications. I also predict that vanzacaftor triple and suzetrigine will become big commercial successes for Vertex. Santa could easily spark a rally for this biotech stock.
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David Jagielski has no position in any of the stocks mentioned. Keith Speights holds positions at AbbVie and Vertex Pharmaceuticals. Prosper Junior Bakiny has positions at Vertex Pharmaceuticals. The Motley Fool has posts and recommends AbbVie and Vertex Pharmaceuticals. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
3 Fantastic Stocks That Could Enjoy a Santa Rally was originally published by The Motley Fool
