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3 Stocks I'm Never Selling

By Brian Feroldi – Oct 18, 2016 at 11:41AM

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Growth potential, deep moats, thriving business models are among the reasons I can't see myself ever parting ways with these three companies' shares.

Image source: Getty Images.

We Fools believe that the best way to grow wealthy is to buy great companies and hold them for the ultra-long term. That's why when we find a truly great business, we add it to our  "never sell" list, which means we hold it tenaciously through thick and thin.

My personal portfolio is chock-full of companies that I believe are great "never sell" candidates. Here's a closer look at three of them -- Ellie Mae (ELLI), MercardoLibre (MELI -0.36%), and Starbucks (SBUX -0.08%) -- and the reasons why I can't ever imagine myself parting ways with them.

Automating the mortgage application process

Interest rates remain near all-time lows, but the Fed has repeatedly said that can't last, and consumers have been in a race to refinance their mortgages before rates start to creep back up. However, financial regulations introduced in the wake of the housing crisis made it more onerous to obtain a mortgage.

Ellie Mae's Encompass software has been designed from the ground up to make it easy for lenders to smooth out the mortgage application process while remaining compliant with the ever-changing laws and regulations. The company's easy-to-use software automates as much as possible, making it easy for lenders to order title searches, credit checks, flood certifications, and more. 

These factors are causing lenders to sign up in droves. Last quarter, Ellie Mae's active user base grew by 21%  to more than 153,000. What's more, users are ordering more services from the company, which is pushing revenue per active user higher, too.

Ellie Mae believes that its total addressable market is $6.25 billion, and that its current market share is just over 20%. Given that the competitive landscape is fragmented, I think there is still ample room for Ellie Mae to continue to gobble up market share and grow at above-average rates for years to come.

An emerging e-commerce powerhouse

Some investors refer to MercadoLibre as the "eBay of Latin America", but I think that title doesn't give the company enough credit. More than 150 million customers rely on the company's website to help them buy or sell items, make digital payments, ship and track packages, and post classified ads. Perhaps a more appropriate title is to call MercardoLibre the "eBay, PayPal, Amazon, and Craigslist of Latin America."

Like many e-commerce businesses, MercadoLibre's biggest advantage over rivals stems from its huge scale. The company boasts the leading market share in fast-growing countries like Mexico, Brazil, and Argentina, which naturally makes it the go-to site for shoppers and sellers alike.


Last quarter, the number of registered users on its platform jumped by nearly 20%, while the number of items sold grew by an even stronger 39.4%. Those figures suggest that the network effect has fully taken hold, which should ensure that MercardLibre remains the dominant player for years to come.

Zooming out, the population of Latin America is roughly 600 million, and only half of the region is currently online. As internet access becomes more ubiquitous, demand for MercadoLibre's services should only grow. With the company firing on all cylinders, I plan on hanging onto its stock for the long-term.

A daily habit for millions

Starbucks has already saturated most of the U.S., which may lead you to believe that its growth story is over. However, a closer look at the coffee chain's long-term plans suggests that there is still plenty of room for it to expand.

The most obvious opportunity for growth lies in opening yet more stores. China, in particular, holds a lot of promise as a market. Right now, there are only about 2,300 Starbucks in the country, and management plans to add another 500 annually for the next five years. Given enough time, it is possible that one day, this market could rival the U.S. as a revenue generator for the chain. Consider that there are currently more than 15,300 Starbucks in the U.S., and it's clear how tremendous the potential is for its expansion in the far more populous nation. 

Starbucks is also experimenting with store concepts in more developed markets that make it easier for consumers to get their daily cup of joe. These include drive-thru-only stores, express stores, and even mobile coffee trucks. 


Starbucks is also aggressively building out its channel development division, which sells its products in third-party stores. While this business segment is still small, it is already generating strong operating margins of 43%, which is providing a meaningful tailwind to profits. 

Added together, these initiatives should ensure that the company's bottom line continues to grow for years to come. Mix in its fast-growing dividend and you'll understand why I consider Starbucks to be one of my favorite long-term holdings. 

Brian Feroldi owns shares of, Ellie Mae, MercadoLibre, and Starbucks. Like this article? Follow him on Twitter where he goes by the handle @Longtermmindset or connect with him on LinkedIn to see more articles like this.

The Motley Fool owns shares of and recommends, Ellie Mae, MercadoLibre, PayPal Holdings, and Starbucks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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