Some stocks are so appealing, thanks to their extremely strong businesses and bright prospects, that they are simply too good to pass up. Eli Lilly (LLY) and Intuitive Surgical (ISRG) are two healthcare companies that fall into this category. Both stocks have delivered excellent returns over the past decade, yet neither has peaked. Here is why Eli Lilly and Intuitive Surgical are standout stocks worth buying.
Obesity is regarded as an epidemic. It affects a considerable proportion of the population, particularly in the United States, where about 40% of adults are living with obesity, according to data from the U.S. Centers for Disease Control and Prevention. Obesity is linked to dozens of diseases and costs the U.S. healthcare system tens of billions of dollars annually. For these reasons, the weight-management drug market is growing rapidly, and Eli Lilly is currently the leader in this segment.
The company’s approved product portfolio includes the injectable anti-obesity drug Zepbound and the oral medication Foundayo. Both drugs are performing well, helping Eli Lilly’s revenue grow at a pace far exceeding that of its mid-sized pharmaceutical peers.
However, in the coming years, Eli Lilly will begin to face more competition in this space. But there is no need to worry: the company is investing heavily in developing next-generation obesity treatments, some of which may prove even more effective than current therapies.
Eli Lilly is seeking to expand the market, as Foundayo has done by attracting an entirely new patient population. The company’s newer, differentiated drugs may have a similar effect. For example, Eli Lilly’s retatrutide recently showed in an 80-week Phase 3 study that overweight or obese patients with type 2 diabetes achieved an average weight loss of up to 20.8%.
This result is impressive because weight loss is typically more difficult for diabetic patients, and retatrutide could be highly effective in helping them shed pounds, largely because it works by activating three natural hormonal pathways—whereas most approved therapies activate only one or two—to help people eat less, burn more calories, and better control blood sugar.
Retatrutide is just one example of Eli Lilly’s deep R&D pipeline in this area, which should allow it to ride the tailwinds of the weight-loss drug trend over the next five years. Even outside that market, Eli Lilly possesses a vast R&D pipeline in other fields, as well as other blockbuster drugs in its approved portfolio. Eli Lilly has been one of the best-performing large pharmaceutical giants in recent years and should maintain that momentum. This stock is a no-brainer buy.
Intuitive Surgical has faced some headwinds in recent years, including increased competition, tariffs, and lower margins on its latest version of the da Vinci surgical system. The company’s stock has significantly underperformed the broader market, falling 33% over the past 12 months. However, Intuitive Surgical’s medium-term outlook remains strong, making the current pullback a buying opportunity.
Here is why the business remains healthy. Intuitive Surgical’s da Vinci 5 has been a major success and presents an attractive opportunity for the company, despite its lower margins. This new device allows surgeons to sense the amount of force being applied and runs on a much more powerful computer—advantages that, over time, could enable smarter software, AI-assisted surgery, fewer errors, and better patient outcomes.
This means that, ultimately, it could expand indications and potentially increase the adoption rate of robotic-assisted surgery (RAS). Therefore, in the long run, focusing on the company’s long-term opportunity makes the lower margins on the da Vinci 5 worthwhile. This also helps Intuitive Surgical stay ahead of the competition. The company’s da Vinci systems are backed by more than 20 years of real-world data, but continuous innovation is critical, and the da Vinci 5 represents that innovation.
In addition, Intuitive Surgical benefits from a wide moat driven by high switching costs, because its expensive equipment—which also has a steep learning curve—is too valuable for hospitals to replace with competitors’ offerings. This gives the company pricing power, which it can potentially use to mitigate the impact of tariffs on its financial results. Intuitive Surgical’s stock may remain volatile over the next year or so, but five years from now, it could be considerably higher than current levels, and patience will be rewarded.
