The S&P500 is up 10% so far this year, extending its decades-long track record of reliable wealth creation. If you had invested $1,000 in an S&P 500-based index fund and allowed it to grow over the past decade, you would have earned an annualized return of almost 13%.
However, that same investment in the right growth stocks could have beaten the market by a wide margin. For most investors, it makes sense to have part of your portfolio in a reliable fund that tracks the broad market. But they should consider supplementing that position with individual stocks that could accelerate their returns. MercadoLibre (NASDAQ: MELI), Dutch Brothers (NYSE: BROS)And Now Holdings (NYSE: NOW) are three top stocks with incredible potential to beat the market.
1. An e-commerce giant that isn’t Amazon
MercadoLibre is the reigning e-commerce leader in 18 Latin American countries. Because many of the markets are still under-penetrated, the company is able to achieve consistently high growth year after year. While that opportunity is far from being fully realized, the company is also entering new markets that are growing even faster than its core e-commerce business.
Total revenue rose 36% year-over-year last quarter, or 94% on a currency-neutral basis. This was driven by a 20% increase in gross merchandise volume (GMV) and a 35% increase in total payment volume (TPV).
There are still countless opportunities in e-commerce. Industry penetration in MercadoLibre’s markets lags far behind other regions such as China and the US. As the company expands its market leadership with more products and better delivery options, customer engagement increases.
However, the payments sector is currently MercadoLibre’s biggest growth generator, and there are even bigger opportunities here. In Brazil, for example, established big banks are losing their share of credit card TPV, while fintech disruptors are gaining importance. Monthly active user growth at MercadoPago accelerated to 38% last quarter, and that should drive future results for the segment. MercadoLibre recently announced that it has started the process to obtain a banking license in Mexico, providing a new opportunity to grow its fintech segment.
The future looks wide open for the company, and if you invest now, you’ll thank yourself in a few years.
2. Nice coffee at better prices
Dutch Bros is a fairly small coffee chain with 876 stores at the end of the first quarter. But it has differentiated itself and its brand, which is growing rapidly and appealing to customers.
The company has reported strong sales growth since going public in 2021, but much of that is due to new store openings. While that’s a typical growth direction for restaurant brands, Dutch Bros’ comparable sales numbers were less compelling. There are a number of factors at play here, including the inflationary environment that is challenging much of the industry in its quest to get customers to accept rising prices.
But Dutch Bros has repeatedly attributed the low and sometimes negative COMP growth to what it calls a strengthening strategy, in which the company opens a slew of new stores in a given area to increase brand presence.
And in the first quarter, Comps growth accelerated to 10%.
The company recently appointed a new CEO to lead its expansion, and the company is scaling efficiently and profitably. Revenue rose 39% year-over-year in the first quarter, reporting a net profit of $16.2 million, after a loss of $9.4 million a year ago. Dutch Bros opened 45 new stores this quarter and has plans for up to 165 openings for the entire year.
With a long-term goal of reaching 4,000 locations, Dutch Bros’ stock offers plenty of opportunities.
3. Financial services for the digital age
Now, like MercadoLibre, it offers financial services in Latin America. It currently operates in Brazil (where its headquarters are located), Mexico (where it also recently applied for a banking license) and Colombia. Now one of the biggest beneficiaries of Brazil’s shift from big banks to fintech disruptors, it counts more than half of Brazil’s entire adult population as members.
The company also benefits from high engagement among its members with an activity rate of 83%, meaning that 83 out of 100 members use the Nu platform at least monthly.
That involvement also ensures higher turnover, lower costs and higher profitability. Revenue rose 69% year-over-year in the first quarter and net profit more than doubled to $379 million. With 20.2 million members last year, Nu also saw an increase in average revenue per active user (ARPAC), another measure of how members are adding services and interacting with the company at higher rates.
Now has no plans to slow down. It launches new products and enters new markets, opening the door to market-beating returns in the near future.
Should you invest $1,000 in MercadoLibre now?
Consider the following before purchasing shares in MercadoLibre:
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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 holds positions in MercadoLibre and Nu Holdings. The Motley Fool holds and recommends positions in Amazon and MercadoLibre. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
Want to beat the S&P 500? Buy These 3 Unstoppable Stocks was originally published by The Motley Fool
