We recently published a list of the 10 Best Stocks to Buy and Hold For 3 Years. In this article, we are going to take a look at where AbbVie Inc. (NYSE:ABBV) stands against the other best stocks to buy and hold for 3 years.
What to Expect From the Stock Market in 2025?
On December 12, Tom Lee, Fundstrat Global Advisors managing partner and head of research, joined CNBC’s ‘Closing Bell’ to discuss his playbook for 2025. Following two years of significant gains, his playbook suggests an optimistic yet cautious outlook for the stock market next year. Lee anticipates that the S&P 500 will rise to approximately 7,000 by mid-2025, before retreating to around 6,600 by the end of the year. This reflects an overall expected increase of about 8% for the year, which is consistent with historical averages for stock market returns. In terms of Earnings Per Share (EPS) estimates Lee projects EPS for the S&P 500 at $260 in 2025 while estimating $300 for 2026. This is slightly below the consensus estimates from Wall Street, which average around $268 for 2025.
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Explaining his investment thesis, Lee pointed towards several themes that could drive the market in 2025. He predicts a “tale of two halves,” where the first half of the year will see stronger market performance due to factors like Federal Reserve policies and business-friendly initiatives under President Trump. Conversely, he expects a pullback in the second half, reflecting historical trends after strong consecutive years. He sees potential in small-cap stocks, which have underperformed relative to large-cap stocks historically. Lee also talked about the mega caps that are leading. He mentioned that investors reach for these companies when there is even slight risk in the market. Secondly, mega-cap stocks are highly sensitive to falling interest rates. With the December cut in effect, the market is bullish for tech, thereby further solidifying the investment case for megacaps.
Despite his generally positive outlook, Lee acknowledges several risks that could impact market performance. For instance, he thinks the newly formed Department of Government Efficiency (DOGE) could potentially lead to reduced government spending and slower economic growth if it is too effective in cutting costs. Moreover, the implementation of tariffs could adversely affect economic conditions and corporate profits. Lee pointed out that historical patterns suggest that after two years of substantial gains, markets often experience declines in the latter half of the third year.
A pharmacist handing out a pharmaceutical drug to a patient in a drug store or chemist.
Our Methodology
To compile the list of 10 best stocks to buy and hold for 3 years, we applied a consensus approach. We sifted through recent articles to get an aggregated list of the best stocks to buy and hold for 3 years. Next, we ranked these stocks based on the number of hedge fund holders as of Q3 2024, sourced from Insider Monkey’s database.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
AbbVie Inc. (NYSE:ABBV)
Number of Hedge Funds: 68
AbbVie Inc. (NYSE:ABBV) is a global biopharmaceutical company that focuses on creating and selling medicines and therapies to treat various health conditions. It is heavily focused on discovering new drugs and therapies that address complex diseases. The company exercises its competitive edge through a diverse portfolio of drugs and treatments. Its portfolio spans key areas including Immunology, Oncology, Neuroscience, Eye Care, and more.
Humira, which is a leading treatment for autoimmune diseases, was a top-selling drug for the company and peaked its sales in 2022 by reaching $21 billion. However, during the third quarter of fiscal 2024, Humira revenues fell significantly to $2.23 billion, down 37.2% year-over-year. The decline was due to the drug losing patent protection last year and also because of increased competition from biosimilars. However, AbbVie Inc. (NYSE:ABBV) was able to successfully navigate this challenge on the back of its extensive portfolio. The company generated $14.46 billion in total worldwide revenue, representing a 3.8% year-over-year increase. Revenue growth was driven by its immunology segment which brought in $7.05 billion in revenue, up around 4% during the same time.
Management also completed the acquisition of Cerevel to enhance its neuroscience pipeline, which grew 15.6% year-over-year to deliver $2.36 billion during the quarter. AbbVie Inc. (NYSE:ABBV) remains one of the best stocks to buy and hold for 3 years due to its robust financial performance and encouraging returns to its shareholders. It announced a dividend increase of 5.8%, effective February 2025, continuing its trend of increasing dividends for 12 consecutive years.
PGIM Jennison Health Sciences Fund stated the following regarding AbbVie Inc. (NYSE:ABBV) in its Q2 2024 investor letter:
“AbbVie Inc. (NYSE:ABBV) is a global pharmaceutical company with a commercial presence in four key therapeutic verticals: immunology, hematology/oncology, neuroscience, and aesthetics. AbbVie’s flagship product Humira is widely used across multiple immunology indications (totaling $21b in worldwide FY22 sales, or 37% of overall sales in the last year before biosimilar entry) but is declining steeply due to U.S. biosimilar entry in 2023. However, AbbVie’s successful development and launch of next-gen immunology drugs Skyrizi and Rinvoq should enable revenues and earnings to grow strongly from its trough earnings-per-share (EPS) in 2023, with Skyrizi and Rinvoq now expected to generate >$27B in sales by 2027, driving an HSD revenue compound annual growth rate (CAGR) from 2024 to 2029. Importantly, AbbVie faces limited patent cliffs through the end of the decade post-Humira. We turned more constructive on AbbVie stock in late 2023 due to these dynamics but decided to reduce exposure following the stock’s rapid run-up to start the year. This was driven by our expectation that faster-than-expected Humira erosion and one-off headwinds in 2025 will reduce growth to below consensus 2025 expectations. As a result, we were underweight AbbVie again by the time the market started reacting to the 2025 concerns, which were crystallized by management commentary on the 1Q earnings call. We have since exited our position.”
Overall, ABBV ranks 9th on our list of best stocks to buy and hold for 3 years. While we acknowledge the potential of ABBV to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ABBV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.