Many stocks have made millionaires over time, depending on how much they started with. Of course, it’s a lot easier to turn $500,000 into $1 million than it is to start with $1,000. But you can still get there if you don’t have $500,000. If you invest in a group of reliable growth stocks and grow your portfolio over many years, you can definitely become a millionaire in time.
Is it that simple? It could be. The first step is to choose the right stocks. Free market (NASDAQ: MELI) And Pending (NYSE: ONON) are two good choices.
1. MercadoLibre: the power of e-commerce plus fintech
MercadoLibre is a powerhouse company operating in 18 Latin American countries. Its core business is an e-commerce platform similar to Amazonbut it has a newer fintech business that is growing explosively.
The e-commerce business is booming. MercadoLibre’s region has a population of over 500 million, larger than the US, but is underpenetrated in digital shopping. MercadoLibre is the dominant e-commerce player in the region and enjoys organic growth opportunities as it widens its net and captures market share.
Gross merchandise volume (GMV) is increasing and accelerating despite persistently high inflation in Latin America. Pressure is high in Argentina, MercadoLibre’s main market for years. With strength in its other major markets (Brazil and Mexico) and overall, it continues to report strong growth. Overall, GMV increased 71% (currency neutral) year-on-year in Q1 2024.
Management has improved the segment’s logistics and accelerated deliveries, and recently launched its Meli+ membership program. These initiatives are driving higher loyalty and sales. Engagement is increasing across a wider range of categories and purchase frequency is increasing.
The fintech segment, however, is where the fastest growth is taking place. Total payment volume (TPV) increased 86% year-on-year in the first quarter and the loan portfolio grew by $4.4 billion, up 46% from last year. Monthly active users (MAUs) also increased by 38% in the quarter. It has the most MAUs of any fintech in all of its markets, except Brazil, where it ranks second.
MercadoLibre shares are trading at a price-to-sales ratio of 5 and a forward price-to-earnings ratio of 35 for the next 1 year. That’s a steal for a stock of MercadoLibre’s caliber. It’s still in its early stages and could give an investment portfolio a boost.
2. On Holding On: Challenging the Active Clothing Giants
If you have seen what Nike And Lululemon Athletics shares have done for shareholders over time, you might be interested in learning more about challenger On Holding. On is even more premium than Lululemon, but it focuses more on the high-end athlete than the luxury buyer, reaching a wide range of economic demographics. It has developed a loyal following of customers who favor its unique designs — and it’s just getting started.
On is known for its CloudTec sneakers, which have an innovative sole that is supposed to provide extreme comfort. It also offers a wide range of shoes for different types of sports, all of which feature the On sole, and a range of lifestyle shoes and sportswear.
The Swiss company reports incredible growth, but it has slowed in the inflationary environment. Sales rose 29% year-on-year in the first quarter of 2024 (currency neutral), led by a 49% increase in its direct-to-consumer business. Direct-to-consumer sales accounted for 38% of the total and the expansion of its overall contribution helps the already high margins.
The high margins are also supported by On’s premium pricing. Gross margin widened to an industry-leading 59.7%, and that trickled down to the bottom line — net income more than doubled in the quarter compared to last year.
On is still relatively unknown in almost all of its markets, including Switzerland, where it has only 49% brand penetration, according to its internal data. That’s a powerful combination of high loyalty and huge opportunities to establish brand awareness, which could lead to incredible long-term returns for investors.
On stock is trading at a high price-to-sales ratio of over 8, but a reasonable price-to-earnings ratio of 34 for the next 1 year. It’s not exactly a bargain, but it’s an appropriate valuation for a stock with high growth and lots of opportunity. If you’re investing today as part of a growth portfolio, On stock can help you create a millionaire-maker portfolio over time.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has positions in MercadoLibre. The Motley Fool has positions in and recommends Amazon, Lululemon Athletica, MercadoLibre, and Nike. The Motley Fool recommends On Holding and recommends the following options: long January 2025 $47.50 calls on Nike. The Motley Fool has a disclosure policy.
2 Millionaire-Maker Growth Stocks was originally published by The Motley Fool
