One of the keys to successful investing is holding shares of companies that can perform well over long periods. However, few companies can thrive for that long while delivering excellent returns to investors. Those that do tend to have some key attributes, including a strong moat and attractive growth opportunities.
Looking for stocks that fit this description? Let's consider two great examples: Eli Lilly(NYSE: LLY) and Veeva Systems(NYSE: VEEV). Here's what investors need to know about these market leaders that could deliver outsized returns in the next two decades.
1. Eli Lilly
Eli Lilly is grabbing headlines thanks to medicines like Mounjaro for diabetes and Zepbound for weight management. However, these therapies will run out of patent protection and stop being growth drivers well before 2045. The company's long-term prospects don't depend on a couple of drugs but on Eli Lilly's culture of innovation. It has remained a leader in the market for diabetes medicines for decades and has routinely made significant breakthroughs -- or at least kept up with the ones made by its main rival, Novo Nordisk.
Dominance in the diabetes market has been a key factor in Eli Lilly's long-term success. That likely won't stop anytime soon. The company has significant experience successfully developing therapies in this field. There is a reason many drugmakers specialize in one or a few therapeutic areas -- future successes are not independent of past ones.
Eli Lilly is now establishing itself as a leader in the fast-growing weight management market. Zepbound is already one of the leaders in the field, and Eli Lilly has several exciting candidates in development. Orforglipron, a potential oral weight loss medicine (there currently isn't an oral option), is undergoing phase 3 studies.
Several more are in mid- or late-stage trials. The drugmaker looks set to be a prominent player in this space over the long run, just as it has in diabetes. Further, Eli Lilly has historically developed successful medicines in other areas and is still doing so. Newer products such as Ebglyss for eczema and Kisunla for Alzheimer's disease look highly promising.
Eli Lilly's innovative machine isn't its only competitive advantage. The company has deep footprints within the healthcare industry, relationships with hospitals and third-party payers, and an extensive network of sales representatives to help market its products -- smaller drugmakers typically don't have the funds to afford doing so.
Lastly, Eli Lilly is a terrific dividend stock. It has increased its payouts by 200% in the past decade. The need for lifesaving medicines will only grow as the world's population ages -- and Eli Lilly is well-positioned to ride that trend while delivering excellent returns to patient shareholders.
2. Veeva Systems
Veeva Systems operates in the large and competitive cloud computing industry. But the company has successfully carved a niche where it provides cloud services tailored to cater to the stringent demand of the life sciences industry. Life science companies have particular needs due to the lengthy, highly regulated process they must endure to launch their products. Perhaps Veeva Systems couldn't directly challenge the most prominent cloud companies, but it has become the leader in this sliver of the market.
Veeva's dominance here has led to tremendous financial success and stock performance in the past decade. Could the stock still perform well in the next 20 years? My view is that it could, for several reasons.
First, the broader cloud computing industry should continue growing for a long time. Amazon CEO Andy Jassy said in a letter to shareholders that this market is still in its early stages. It seems plausible, given the benefits the cloud offers -- especially with newer artificial intelligence applications -- that the industry is on a long-term growth path.
Second, the life sciences industry will also maintain an upward trajectory, partly due (once again) to the world's aging population and a greater demand for various medical products. As Veeva Systems' target industry expands, that should be good for the company's business.
Third, the company benefits from a strong competitive advantage: switching costs. Life science companies depend on its products for their day-to-day operations to help run clinical trials smoothly, submit applications to authorities, abide by various regulations, etc. Switching from one provider to the next can be risky and could disrupt a company's operations, with potentially severe consequences.
That's why Veeva Systems should remain a leader in its niche and deliver excellent returns over the long run. It's a top stock to buy and hold for the next two decades.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Prosper Junior Bakiny has positions in Amazon, Eli Lilly, and Novo Nordisk. The Motley Fool has positions in and recommends Amazon and Veeva Systems. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
