When is it time to buy a stock? One of the best-known pieces of investing advice tells us to buy low and sell high. But what constitutes "low" is relative. A stock near its 52-week high can still be considered at a "low" point, provided there's plenty of upside left. That's why investors shouldn't ignore such stocks.
With that as a backdrop, let's look at two companies trading near their 52-week highs and are still worth buying: Abbott Laboratories(NYSE: ABT) and Netflix(NASDAQ: NFLX).
1. Abbott Laboratories
Abbott Laboratories hasn't performed well in the past year, but has rebounded over the last three months. Whether the medical device specialist will maintain this momentum in the short run is anyone's guess, but there's still substantial upside for Abbott if investors are willing to hold onto the stock long enough.
The company didn't do well in 2023 partly because of declining revenue and earnings, but that was due to lackluster sales from COVID-19 diagnostic products, an issue that won't drag Abbott Laboratories' sales down forever. Abbott's organic sales growth in 2023 was 11.6%, excluding its coronavirus-related products. For its base underlying business, the healthcare giant predicts organic sales growth of between 8% and 10% in 2024.
Furthermore, Abbott Laboratories' vast lineup of products -- across its medical devices, diagnostics, pharmaceuticals, and nutrition segments -- gives it plenty of opportunities. As CEO Robert Ford recently said:
In the last two years, we have announced more than 25 new growth opportunities, which include a mix of new products, new indications, and geographic and reimbursement expansions.
One of Abbott's most exciting opportunities is in diabetes care, thanks to its continuous glucose monitoring (CGM) system, the FreeStyle Libre. In the past couple of years Abbott earned important reimbursement deals in France, the U.S., and Japan, granting it access to an additional 3 million patients in these countries who are eligible for third-party reimbursement for CGM devices.
Beyond diabetes care, Abbott Laboratories has other devices that can drive top-line growth, from its Aveir pacemaker to its MitraClip, which treats mitral regurgitation.
Lastly, it's hard to mention Abbott without talking about its stellar dividend record. The company has now increased its payouts for 52 consecutive years. Whether for income or for growth, Abbott Labs remains a top stock pick, even as it hovers close to its 52-week high.
2. Netflix
It wasn't that long ago that streaming specialist Netflix faced some difficult times, which included rising competition, streaming fatigue, and tens of millions of households accessing its service for free. However, the company made significant changes to its business. It introduced a cheaper, ad-supported subscription option, and ensured that many customers who shared their passwords with people outside their households would start paying to do so.
Netflix's decision to offer a cheaper subscription tier seems to be paying off. It ended 2023 with 260.28 million paying members, an increase of 12.8% year over year. The company added 13.12 million net new subs during the fourth quarter; the last time it had a higher number of new additions was in the first quarter of 2020.
Netflix thinks its advertising business will start meaningfully contributing to revenue growth in 2025. The company has already improved on that front. In the fourth quarter, the top line increased by 12.5% year over year to $8.8 billion. Netflix is projecting revenue growth of 13.2% for the first quarter of 2024. Net income and free cash flow also saw substantial increases in the latest period.
As it turns out, some investors wrote Netflix's eulogy too quickly. The company remains the leader in streaming and still sees plenty of growth opportunities while it continues to gain on cable. Of course, Netflix's growing number of subscribers will allow it to execute its strategy even better.
The company uses data on what viewers enjoy to direct its content production efforts, and this has paid off substantially over the years. The more subscribers, the more data, and the more it can create shows and movies people want to watch -- a good example of the network effect. This is one more reason Netflix can still deliver outsized returns to investors willing to hold its shares for a while.
Should you invest $1,000 in Abbott Laboratories right now?
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories and Netflix. The Motley Fool has a disclosure policy.
