2 Beaten-Down Stocks Worth Buying and Holding for the Next Decade

Some investors believe equity markets are currently overvalued. There are good reasons to think so. For instance, the S&P 500's Shiller price-to-earnings ratio -- a valuation metric -- has been higher in recent years than at any point since the late 90s, right before the dot-com bubble burst. Still, even now, it's possible to find attractive stocks to buy, and one potentially lucrative strategy is to look for beaten-down companies that appear to have what it takes to recover. Here are two options to consider: Netflix (NASDAQ: NFLX) and Intuitive Surgical (NASDAQ: ISRG).

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1. Netflix

Netflix is having a terrible year. The company's financial results have been subpar, and engagement on its platform isn't particularly strong either. During the first half of the year, the company's viewing hours increased by just 2% year over year. However, Netflix still boasts one of the deepest ecosystems of paid subscribers in the streaming industry, and that could be the key to turning things around. Netflix needs to find ways to keep its viewers engaged amid the practically infinite entertainment options available.

Part of the company's strategy is to push into areas that have contributed to its recent struggles. For instance, Netflix noted a negative impact due to major sporting events such as the Men's World Cup and the Winter Olympics. The company has been slowly ramping up its efforts in the massive and lucrative sports streaming niche. It has acquired the rights to the 2027 and 2031 Women's World Cups and has expressed interest in bidding for future Men's World Cups.

Of course, Netflix's sports strategy will likely extend well beyond that. And the company has other opportunities as well. According to some reports, management has been considering turning the Netflix app into a streaming hub that allows its customers to access other streaming platforms.

That might help address Netflix's engagement woes and boost ad revenue as well. We don't yet know for sure that Netflix will go that route. Still, the most important point is that the company's massive ecosystem, brand name, and significant data flywheel provide it with ample monetization opportunities.

Meanwhile, there remains plenty of room to grow in streaming. It still accounted for a bit under 50% of TV viewing time in the U.S. as of May, according to some data. That number is likely much lower elsewhere. Netflix could recover as it seeks ways to adapt to the changing landscape, something it has done several times before. In my view, at current levels, the stock is a buy.

2. Intuitive Surgical

The U.S. population will age significantly over the next decade. That should lead to increased demand for medical care, including the services Intuitive Surgical provides. The company develops and markets robotic-assisted surgery (RAS) devices, with its most famous platform being the da Vinci system. However, Intuitive Surgical has faced challenges, leading some investors to question whether it can perform well over the next 10 years. One of them is increased competition.

Healthcare leaders like Medtronic (NYSE: MDT) and Johnson & Johnson (NYSE: JNJ) have recently launched their own RAS systems in the U.S. Also, Intuitive Surgical's margins haven't been as strong as the market expected in recent quarters, partly due to the rollout of newer systems such as the da Vinci 5. But even with these headwinds, there are good reasons to remain bullish on Intuitive Surgical's prospects, in my view.

First, consider that the company has a significant lead over the competition. The da Vinci system has been on the market for over 20 years. Its installed base is closing in on 12,000 devices, and the da Vinci system is even used in some resident and fellow training programs. That grants the company a wide moat through high switching costs: Surgeons who have trained on the da Vinci system and used it for a while won't easily switch to a new platform.

Further, as Johnson & Johnson points out, despite the advantages of RAS, fewer than 8% of relevant soft-tissue procedures are performed robotically. So the market is underpenetrated and will grow even larger due to our aging population. What about Intuitive Surgical's lower margins? Newer, better devices with more advanced features and significantly greater computing capacity --like the da Vinci 5 -- could eventually expand the market, earn more indications, and increase procedure volume.

All of that won't happen overnight, but over the medium term, the perks of Intuitive Surgical's newer launches might more than offset the initial lower margins. So, despite its recent obstacles, Intuitive Surgical remains an attractive stock. And after dropping about 30% this year, the company could rebound and deliver excellent returns over the next 10 years.

Prosper Junior Bakiny has positions in Intuitive Surgical and Johnson & Johnson. The Motley Fool has positions in and recommends Intuitive Surgical, Medtronic, and Netflix. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2028 $520 calls on Intuitive Surgical and short January 2028 $530 calls on Intuitive Surgical. The Motley Fool has a disclosure policy.