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2 beautiful shares that I will “never” sell

Investors often trade with the intention of never selling. Warren Buffett has often said that his favorite holding period is “forever,” and that holding some stocks for years or decades has often paid off for investors.

Unfortunately, changing business conditions or management teams may make selling a stock the only sensible choice, but you can’t really promise to ‘never’ sell.

Nevertheless, I own stocks that I can’t imagine selling, and Shopify (NYSE: STORE) And MercadoLibre (NASDAQ: MELI) fit that description. This is why.

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Shopify

CEO Toby Lütke has stated its intention to build a “100-year company” when it comes to Shopify, and judging by its growing competitive advantage, there’s a good chance it will achieve that goal.

As most investors know, Shopify provides a platform for merchants to operate an ecommerce site. It has developed an edge in this otherwise challenging industry by building a fast, highly customizable site that sellers can build and manage without coding knowledge.

Furthermore, it has built an ecosystem that caters to most of the additional needs of online sellers. Managing inventory, handling payments, running email marketing campaigns, and raising capital are among Shopify’s offerings for its customers.

Currently, Shopify stock is selling at a discount of about 65% to its 2021 high. Granted, the pandemic-induced bull market likely drove that stock price. Moreover, the attempt to build a logistics business led to a return to losses.

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However, the company continued to grow even as investors abandoned the stock in the ensuing bear market. Revenue grew 26% in 2023 and 21% in 2022. Additionally, the sale of the low-margin logistics company dramatically improved Shopify’s financials, leading to profits if the one-time costs associated with that spinoff weren’t are included.

For these reasons, the stock should be assessed based on its underlying business performance. Since hitting a multi-year low in October 2022, the stock is up nearly 170%.

Furthermore, the declines and growing sales have pushed the price-to-sales ratio (P/S) to 11, a level close to multi-year lows for the sales multiple. That’s arguably an attractive valuation for buyers as Shopify works to attract more customers and fulfill its vision as a 100-year-old company.

MercadoLibre

MercadoLibre is a ‘never sell’ stock because of its anti-fragility. As investors know, regulatory challenges, high inflation and political unrest often shape the business environment in Latin America. But rather than hinder MercadoLibre, the company has often done just that blossomed because of such challenges.

For example, because a large percentage of Latin Americans do not have a bank account or credit card, the company created Mercado Pago to offer payment products. This company provided products that allowed customers to shop online with cash. It was so successful that it now serves people and businesses who don’t shop on the e-commerce site.

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The same applies to Mercado Envios, the segment that provides warehousing, order fulfillment and shipping services to its customers. Thanks to Mercado Envios, same-day and next-day shipping has become possible in some markets. These and other MercadoLibre companies operate separately and as part of the company to give it a competitive advantage in its various businesses.

Amid these synergies, revenues have continued to rise even as stocks rose and fell during the last bull and bear markets. Revenue grew by 49% in 2022 and 37% in 2023.

Moreover, despite having grown 87 times from its 2007 IPO price, the stock is unlikely to stop rising further. Americas Market Intelligence predicts a compound annual growth rate of 23% for Latin American e-commerce through 2026 , and the revenue growth indicates that MercadoLibre will account for a higher-than-average percentage of that growth.

That level of success may partly explain why its P/S ratio of 5 is higher than other e-commerce titans Amazon or Sea limited, both of which sell for three times sales. Nevertheless, with sales near multi-year lows several times, it’s probably an excellent time to take advantage of the growing opportunity in this stock.

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Don’t miss this second chance at a potentially lucrative opportunity

Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.

On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

  • Amazon: If you had invested $1,000 when we doubled in 2010, you would have $20,589!*

  • Apple: If you had invested $1,000 when we doubled in 2008, you would have $40,491!*

  • Netflix: If you had invested $1,000 when we doubled in 2004, you would have $369,776!*

We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.

See 3 “Double Down” Stocks »

*Stock Advisor returns June 11, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Will Healy has positions in MercadoLibre, Sea Limited and Shopify. The Motley Fool holds and recommends positions in Amazon, MercadoLibre, Sea Limited, and Shopify. The Motley Fool has a disclosure policy.

2 Great Stocks I “Never” Sell was originally published by The Motley Fool

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