Sage Investment Club

Image source: Getty Images With January soon to end, I’ve been looking for stocks to buy in February. I’ve particularly been focusing on businesses whose long-term growth prospects remain sound despite their falling share prices. Diageo Shares of Diageo (LSE: DGE) fell 7% last week after the spirits giant reported earnings. In the six moths to 31 December, the company’s operating profit grew 15.2% to £3.2bn, while organic operating profit (excluding acquisitions and currency moves) grew 9.7%. However, sales in its key North American market disappointed. Organic sales increased by 3% there, which was below consensus expectations for over 6% growth. Medium term, Diageo expects overall organic operating profit to grow within a range of 6% to 9%. That’s due to the company’s strategic focus on premiumisation. Premium brands The company’s premium-plus brands — such as Johnnie Walker and 21Seeds tequila — drove 65% of organic net sales growth during the second half of last year. Chief Executive Ivan Menezes said: “The top end of our portfolio, the top 28%, the most expensive products, grew double digit in every region of the world“. This increasing focus on premium brands should pay off over time. These labels have higher margins and is an area where the company can increase prices more readily. So I expect Diageo to carry on snapping up popular premium brands to keep profits trending upwards. After its recent haircut, the stock now has a price-to-earnings (P/E) ratio of 21. However, this is still above the average P/E of the FTSE 100, which stands at 13.7 today. So valuation risks remain. Still, I’m ready to top up my position at today’s price. Intuitive Surgical Intuitive Surgical (NASDAQ: ISRG) launched its first da Vinci surgical robot in 2000. Today, it has an installed base of 7,544 of these surgical systems. That’s set to increase over the next decade as more minimally-invasive surgeries are conducted robotically. These machines provide surgeons with better dexterity and a greater range of motion than the human hand. For patients, this results in reduced blood loss and scarring, and ultimately less time spent recovering in hospitals. The company makes the bulk of its profits from servicing these robotic systems. It’s the classic razor-and-blades business model, honed by the likes of Gillette, among others. That’s where they make money on the consumables (blades), rather than the razor (the da Vinci robots, in this case). However, competition from deep-pocketed players like Johnson & Johnson and Medtronic is expected to increase in the coming years. While that could threaten Intuitive’s entrenched market position, I don’t see the company becoming complacent. One region with extreme long-term growth potential is in Asia, particular China. And the robotics giant is looking to capitalise on this opportunity, recently investing over $103m to build a manufacturing and innovation base in Shanghai. China is already home to the world’s largest population of older people, but a staggering 402m people are expected to be aged 60 years or older by 2040. The need for age-related surgical procedures is only going to grow. So I think the growth potential for the company internationally remains extremely large. With the stock down 32% from its all-time high in 2021, it’s at the top of my buy list for February.

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