Anxious investors who picked April to go on a long internet-free vacation couldn't have planned it better. Earlier this month, the S&P 500 index quickly sank more than 10% after President Donald Trump unveiled tariff rules that threatened the U.S. economy.
The White House held firm to its commitment for nearly a week before the bond market started to crack and a tariff pause was implemented. The stock market has recovered somewhat, because now we know there's a limit to the amount of economic devastation the present administration is willing inflict in its attempt to bring back manufacturing jobs and force other countries to do what it wants.
But even if disaster hasn't been totally averted and the economy craters, Intuitive Surgical (NASDAQ: ISRG) and Axon Enterprise (NASDAQ: AXON) are well positioned to continue growing sales. Unfortunately, high expectations are often baked into their stock prices. Here's why I think you want them on your list of stocks to buy just in case the losses we've already experienced this year are just the beginning of a more dramatic bear market.
1. Intuitive Surgical
If you've had a hernia repaired or a prostate gland removed, odds are strong that the surgeon who performed the procedure was using one of Intuitive Surgical's da Vinci surgical systems to make ultra-precise incisions they couldn't make on their own.
Installing a new da Vinci system costs over $1 million, but the improved success rate makes them more than a little popular. At the end of 2024, there were 11,040 da Vinci systems in hospitals globally. The number of hospitals with at least seven da Vinci systems jumped 49% higher last year.
There are other companies selling surgical robots, but they aren't nearly as popular as Intuitive Surgical's da Vinci systems. This will likely be the case for the forseeable future because hospitals like to stick with what they've already trained their staff to use.
Intuitive Surgical makes most of its money selling instruments that need to be replaced before each procedure. The number of da Vinci procedures performed in the first quarter grew 17% year over year. Thanks to instrument sales, total revenue grew at a slightly faster 19% over the same period.
With an enormous base of machines already installed and an army of surgeons trained to use them, Intuitive Surgical seems likely to grow at a rapid clip for at least another decade. Unfortunately, extremely high expectations are nearly always baked into its stock price.
Intuitive Surgical shares have been trading for 63.7 times trailing-12-month earnings. While there's a good chance it can grow into its lofty valuation, It's probably better to wait for a more attractive entry point, which the next market crash could provide.
2. Axon Enterprise
Axon Enterprises earns money selling cameras and tasers to law enforcement, but this isn't all. Software subscriptions that police need to store and manage the files that Axon's devices produce lead to an extremely reliable revenue stream.
Axon is leveraging thousands of relationships with law enforcement organizations across the country to market a new generative artificial intelligence (AI) product called Draft One. Just a few clicks is all it takes to draft a police report that includes files generated by Axon's body and dashboard cameras.
With total revenue that grew 33% last year and a total addressable market over 50 times larger than its annual sales figure, this stock warrants a premium valuation. Unfortunately, buying this stock at recent prices means you need to be willing to spend 122 times trailing earnings. That is an extremely high valuation that most investors are not comfortable with.
Axon's enviable competitive positioning combined with a huge addressable market are a growth investor's dream. Sadly, I've watched it for years without buying any shares due to an incessantly high valuation. If the market tanks again, though, this one will be at the top of my list of stocks to buy on the dip.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Axon Enterprise and Intuitive Surgical. The Motley Fool has a disclosure policy.
