Motley Fool: A health care dynamo
Abbott Laboratories (NYSE: ABT) is a well-diversified health care company, with four distinct units: medical devices, diagnostics, nutrition and established pharmaceuticals. This is great because it means if one of these businesses faces tough times, another could compensate and maintain overall growth.
In fact, this is happening right now. With coronavirus testing on the decline, the diagnostics business has seen revenue fall. But in the third quarter, the medical devices unit delivered double-digit revenue growth, helping Abbott to report a 5% year-over-year increase in revenue to $10.6 billion.
Abbott sells market-leading products across its businesses, from the Ensure brand in its nutrition business to the FreeStyle Libre continuous glucose monitoring (CGM) system in its medical devices unit.
The company also has a full pipeline of innovations to keep the growth going. It most recently launched Lingo, a CGM platform for wellness purposes.
Abbott shares recently traded at a forward-looking price-to-earnings (P/E) ratio of 22. That’s a reasonable price to pay for a company that has a strong track record of growth, leading products and solid long-term prospects. (The Motley Fool owns shares of and recommends Abbott Laboratories.)
Ask the Fool
Q. What’s a good way to invest in socially responsible companies? – D.L., Flagstaff, Arizona
A. Consider mutual funds or exchange-traded funds that focus on socially responsible companies. That saves you the trouble of studying companies and choosing the most promising ones – you instead let professional stock analysts do that work. Or, with passively managed funds, the managers simply hold the same securities that are in a socially responsible index.
Some such funds have the acronym ESG in their title, meaning that they focus on “environmental, social and governance” factors. Here are a few to read up on and consider: The iShares ESG Aware MSCI USA ETF (ticker: ESGU), the Vanguard ESG U.S. Stock ETF (ESGV) and the Invesco ESG NASDAQ 100 ETF (QQMG).
Understand that there are many ways for you (or a fund) to invest responsibly. You might focus on companies that seem to be doing good for the environment or society. Or you might just avoid companies you find objectionable – such as those that make and sell products you disapprove of (perhaps alcohol, guns or tobacco, for example).
Remember, too, that few companies will be perfect on every issue. For example, they might treat the planet well but skimp on employee pay and benefits. You can learn much more at sites such as GreenMoney.com, CorpWatch.org, CSRwire.com and CorporateRegister.com.
Q. Why does the stock market’s value go up or down every day? – V.N., Bella Vista, Arkansas
A. The total market value reflects the movement of thousands of companies’ stocks. Each stock moves frequently, influenced by what investors think of it, based on the latest news or developments. Good news often pushes a stock’s price up, and bad news does the opposite.
My smartest investment
I’m 84 years old and earned an average middle-class salary during my working years, but I did several things that made me wealthy. I maxed out contributions to retirement plans, such as 401(k)s and SEP IRAs. I invested those contributions in no-load mutual funds.
My smartest move was in 1998, when Roth IRAs became available. My accountant asked if I had confidence that the U.S. stock market would grow at about 6% or more over the next 10-plus years. I said yes. He then recommended converting as much as of my retirement funds into Roth IRAs as I could. This caused a significant financial burden since there was a large tax due with each conversion. My wife and I agreed it was worth it. We lived frugally for a few years to make it work.
Now in retirement, our only income is Social Security, a small pension and required minimum distributions (RMDs) from our SEP IRAs. Our portfolio is under seven figures and mostly in Roth IRAs, meaning we can withdraw as much as we need tax-free! Those years of living frugally were well worth it. – Anonymous
The Fool responds: Bravo! Roth IRAs can indeed be powerful wealth builders, and ending up with a big account to tap tax-free in retirement is hard to beat.
Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.