Good growth stocks can be found anywhere, in any industry, and the most successful investors will let their search for one take them where it will.
But we asked three top Motley Fool contributors to help you cut down on your travel time and identify three growth stocks that can make any investor successful. Read on to learn why MercadoLibre (MELI -3.21%), Tencent Holdings (TCEHY -0.08%), and Boyd Gaming (BYD 6.98%) have what it takes to successfully continue growing.
Go overseas for strong growth
Dan Caplinger (MercadoLibre): Successful investors know it's important to look for good investment opportunities even when they lie outside the borders of the U.S., and Latin America in particular has been an interesting place to invest in recent years. After experiencing explosive growth during the first 10 to 15 years of the 21st century, Brazil and other regional powerhouses ran into some issues. That knocked MercadoLibre stock for a loop, as foreign investors lost confidence in the ability of the local economies to sustain growth, especially at the base consumer level.
However, as Latin America has bounced back recently, so too has MercadoLibre. The e-commerce giant saw revenue soar by nearly three-quarters in its most recent results, and impressive leaps in net income and gross merchandise volume showed just how popular MercadoLibre has become. Moreover, MercadoLibre has followed the same pathways toward growth that its peers in the U.S. have used to generate greater profit, offering its MercadoPagos payment service and its MercadoEnvios shipping service to help facilitate e-commerce. The offerings have made the Latin American online marketplace a hub for commerce more broadly, and further innovations like financing could help increase business further.
Latin America will probably remain volatile, and investors can expect ups and downs along the way. However, for smart long-term investors who can weather market fluctuations, MercadoLibre has a lot going for it.
Synergy on another level
Keith Noonan (Tencent Holdings): Like Dan, I'm recommending that investors be open to looking overseas for growth, and I'm pointing even farther east. The tech sector remains the best place to look for big growth potential, and I think Chinese internet giant Tencent Holdings deserves strong consideration.
The company is China's social-media leader and has succeeded in building an integrated platform of services and entertainment offerings that's unrivaled on either side of the globe. Its combined Weixin and WeChat messaging platforms boasted 938 million monthly active users as of the company's last reported quarter, and with somewhere around two-thirds of users making use of the integrated digital-payment features, these apps generate significant revenue streams beyond ad sales. That's not to downplay the importance of advertising to the company, as last quarter saw online ad sales increase 47% year over year to reach 14% of overall revenue, but digital payment services are likely to see huge growth in the coming years, and Tencent is in position to benefit.
The company also has a dominant position in content, thanks to market-leading video games such as League of Legends and Clash of Clans, which is an advantage many other large tech players are trying to achieve as entertainment products are increasingly viewed as ways to bring consumers into broader product ecosystems. Then there's Tencent's push into film development and its rapidly expanding cloud services businesses to consider, both of which present significant sales and synergy opportunities.
Valued at roughly 50 times trailing earnings, the company's stock might look pricey, but it has some huge advantages working in its favor and no shortage of avenues to continued success.
Bet on seeing this hot streak continue
Rich Duprey (Boyd Gaming): I'm going a different route and looking for a growth stock closer to home. Although Las Vegas Strip gambling luck seems to run hot and cold, off-Strip gambling looks to be where the real growth is, and regional casino operator Boyd Gaming is cashing in. Having made several smart acquisitions, it's now ready to hit the jackpot.
With the addition of the Aliante, Cannery, and Eastside Cannery casinos last year, Boyd saw local market revenue jump to $220 million in the first quarter, with adjusted earnings before interest, taxes, depreciation, and amortization rising to $66 million. On the Strip, its California casino benefited from renovations it made at the Hawaiian-themed resort.
The improved performance also led the board of directors to reinstate its dividend, with an initial quarterly payment of $0.05 per share that will be paid July 15 to investors who were shareholders as of June 15. They also reaffirmed their share repurchase program, which has $92 million remaining on it. President and CEO Keith Smith said, "We believe a balanced approach of deleveraging, investment in organic growth projects, and opportunistic acquisitions -- combined with the return of a portion of our free cash flow to shareholders -- is the right strategy to maximize long-term shareholder value."
At just 13 times earnings and 17 times estimates, Boyd Gaming offers a good value to investors, and when you factor in analysts estimating that the casino operator is expected to grow earnings 38% annually annually for the next five years, that's a deeply discounted stock. Trading at just over its sales, this is a growth stock smart investors will want to roll the dice with.