While bull and bear markets are a normal part of the stock market cycle, it's never fun to deal with turbulence when it hits your portfolio. The market has been enjoying a prolonged bull period that's continued into the first half of 2024, even as the recent volatility has some investors feeling nervous.
All markets can present opportunities for the long-term investor. If you have cash to put to work, money that you don't need for bills or other near-term financial obligations, it's always a good time to start or add to a position in a quality company.
For example, if you have $1,000 to invest in stocks right now, here are two no-brainer names to consider that could be an excellent place to park some or all of that capital for the next five years or more.
1. Eli Lilly
Eli Lilly (NYSE: LLY) has been on a winning streak recently, with shares popping up by roughly 60% since the start of 2024 alone. The company has been a long-standing fixture in the pharmaceutical industry, but its recent successes have reignited interest from investors.
These successes include its market-leading weight loss drug Zepbound and diabetes drug Mounjaro (both of which have the same active ingredient, tirzepatide, a GLP-1 inhibitor). Eli Lilly just won another regulatory victory with the long-awaited approval of Kisunla for the treatment of early symptomatic Alzheimer's disease in adults. Then, there are other established winners in the company's portfolio, such as Verzenio, Jardiance, and Taltz.
In the second quarter of 2024, Eli Lilly brought in total revenue of $11.3 billion, a 36% increase from the same quarter in 2023. Mounjaro sales accounted for approximately 28% of that top-line figure, bringing in a total of $3.1 billion in the three-month period alone. Eli Lilly's Q2 net income rose by a sizzling 68% year over year to just shy of $3 billion.
The market potential for tirzepatide for both weight loss and diabetes is immense. For example, while the tirzepatide formulation marketed as Mounjaro is currently approved for adults with type 2 diabetes only, it is currently being studied across other use cases, including as a mechanism to delay progression to diabetes in adults with pre-diabetes.
In Eli Lilly's 176-week phase 3 study called SURMOUNT-1, which is so far the longest completed trial of tirzepatide, among adults with pre-diabetes or who were classified as obese or overweight weekly injections slashed the risk of progression to type 2 diabetes by 94% compared to the placebo. The same study also found that tirzepatide resulted in continued weight loss throughout the trial, with participants who received a 15 mg dose decreasing their body weight by 22.9% by the end of the treatment window.
Eli Lilly had close to $3.4 billion in cash on hand at the end of the recent quarter, a nice stash as it continues to maintain its long-standing dividend. The company has paid a dividend in some form since the 19th century. While it currently yields less than 1%, Eli Lilly's forward annual dividend is approximately $5.29 per share.
There's plenty of room for this stock to run even after the Mounjaro/Zepbound buzz starts to die down, which, by all accounts, won't be anytime soon. Some analysts think that tirzepatide could have peak annual sales potential in the ballpark of $25 billion and could be a lifetime drug for a broad swath of patients. Now looks like a great time to scoop up shares of this healthcare stock for the long run.
2. Upstart
Upstart (NASDAQ: UPST) is a marketplace that delivers lending decisions predicated on algorithms driven by artificial intelligence and machine learning. The platform uses over 1,600 variables, and its models are trained on more than 73 million repayment events to assess the creditworthiness of applicants.
Upstart's platform leverages far more than traditional credit scoring models to determine loan approvals and is constantly calibrating to the macro environment at hand. It's also more sensitive to changing economic factors as well as a heightened level of risk present when the potential of default is on the rise.
Upstart makes most of its money from sources like referral fees from serving as the middleman between applicants and the financial institutions that fund the actual loans. While the company has had to carry more loans than usual on its own balance sheet in recent quarters, third-party institutions that Upstart partners with still funds the lion's share of loans.
Given the ongoing high state of interest rates, the fact that consumers are less inclined to apply for loans these days, and the reality that many institutions are more reluctant to fund loans given the increased cost of doing so, all of this has created an unfavorable lending backdrop. This reality has affected many companies, including Upstart, which, as previously stated, has a platform that is designed to constantly update to the macro situation at hand.
On the bright side, Upstart's models are becoming increasingly accurate. Right now, 91% of all loans are fully automated without any human interaction. Upstart isn't profitable yet, but it generated revenue of $128 million in the second quarter of 2024. Transaction volume totaled $1.1 billion, or 143,900 loans in the three-month period, down 6% from the year-ago quarter.
Upstart also reported 57% growth in its small-dollar loan program in the recent quarter. A newer product, its Home Equity Line of Credit (HELOC) program, is now available in 30 states and covers 51% of the U.S. population. Not only are 42% of HELOC applicants approved instantly, but management noted in the Q2 earnings call that it had experienced zero defaults on 300 originated HELOCs to date.
There's no denying that Upstart's reliance on the personal lending environment creates a level of risk that investors must be comfortable with in order to put cash into the stock. That being said, the lending environment is slowly but surely improving, and Upstart's disruptive model hasn't gone anywhere. These elements and Upstart's improvements on multiple financial fronts could be enough to induce some investors to take a slice of the action.
Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Upstart. The Motley Fool has a disclosure policy .
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