Santa Claus will soon be on his way to deliver gifts to children around the world. But can the jolly gift-giver also bring something to investors? so called “Santa Claus Rallies” May be near the end of the year.
Three Motley Fool contributors think they’ve identified excellent stocks that could be well-positioned to benefit from a Santa Claus rally. Here’s why they chose it Abbv(NYSE: ABBV), Novo Nordisk(NYSE: NVO )And Vertex Pharmaceuticals(NASDAQ: VRTX ).
David Jagelski(AbbVie): At the end of the year, a growth stock that may be the reason for a rally is AbbVie. The drugmaker has long-term prospects and could be one of the better stocks to buy as the year draws to a close. The stock has had a torrid year as its shares are up just 11% (through Monday’s close), which pales in comparison. S&P 500A more impressive rally of 27% so far.
Investors have been bearish on the stock since the company announced a stock sale in November after it failed to meet its primary endpoint in Phase 2 trials of its schizophrenia drug, imraclidine.
But it could create a good opportunity to buy the stock at a discount right now, especially when it reported some encouraging news from a different trial. Earlier this month, the company announced positive results for tavapadone, which met both primary and secondary endpoints in a Phase 3 trial for the treatment of early Parkinson’s. The company plans to submit a new drug application next year, which could lead to another approval for the disease. In October, regulators approved Vialev, a treatment for advanced Parkinson’s disease.
Every drug that is in AbbVie’s pipeline is going to be a success. But it’s still a solid growth stock to own and investors appear too bearish on a disappointing trial result for amraclidine. With more than 90 compounds in its pipeline, there are going to 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 next year’s estimated forward earnings (based on analyst estimates), it may only be a matter of time before AbbVie’s stock rebounds.
Happy Junior Bikini(Novo Nordisk): Several factors can lead to a year-end stock market rally, including optimism about the year ahead. It’s hard to predict which companies – if any – will benefit in 2025, but Novo Nordisk is a good pick 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. Over the past six months, shares of Novo Nordisk have fallen 24%.
This is despite the company reporting strong revenue and earnings growth due to its diabetes and obesity drugs. The market is arguably undervaluing Novo Nordisk. Second, the company may make significant clinical advances next year. Novo Nordisk has several late-stage programs in development. Maybe it will Release data for CagriSemaAn investigational weight-loss drug that could generate $20 billion by 2030, according to some estimates.
Novo Nordisk may also post results for semaglutide, the active ingredient in Vegovi and Ozempic, in the treatment of patients with Alzheimer’s disease and metabolic dysfunction-related steatohepatitis, two areas of high need. Novo Nordisk’s relatively poor performance since June and the potential catalyst it could experience in 2025 could lead to a Santa Claus rally for the stock. However, even if that doesn’t happen, the drugmaker remains one of the better picks in the industry. Novo Nordisk is an innovative company that consistently produces 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 fell on Thursday after the company announced the results of a Phase 2 clinical study evaluating suzetrigine in the treatment of painful lumbosacral radiculopathy (LSR), a type of sciatica. However, I think there is potential for a rebound at the end of the year.
For one thing, in my opinion, the sale was off. Investors were concerned that suzetrigine did not perform statistically better than placebo in a phase 2 study. Importantly, however, non-opioid pain medication still met the study’s primary endpoint of pain reduction on the Numerical Pain Rating Scale (NPRS). Vertex plans to talk with regulators about advancing suzetrigine into late-stage testing for LSR.
It is not uncommon for the placebo response to be unexpectedly high in clinical trials for pain medications. Vertex’s post hoc analyzes suggested that a different trial design might better control for this issue in phase 3 testing.
The big story for Vertex is that it is awaiting not just one but two US Food and Drug Administration (FDA) approval decisions in the next few weeks. The FDA is scheduled to announce its decision on the approval of the vanzacaftor triple-drug combination in the treatment of cystic fibrosis by January 2, 2025. The agency has set a PDUFA date of January 30, 2025, for its decision on suzetrigine in the treatment of chronic pain. . (By the way, the late-stage results of the drug in this indication look pretty good without a yellow flag.)
I expect thumbs-ups from the FDA for both drugs. I also predict that vanzacaftor triple and suzetrigine will become major commercial successes for Vertex. Santa could easily bring a rally to this biotech stock.
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David Jagelski No position in any of the stocks mentioned. Keith Speights Holds positions in AbbVie and Vertex Pharmaceuticals. Happy Junior Bikini holds positions at Vertex Pharmaceuticals. The Motley Fool has positions in and recommends AbbVie and Vertex Pharmaceuticals. The Motley Fool recommends Novo Nordisk. Motley Fool has a Disclosure Policy.
