Please ensure Javascript is enabled for purposes of website accessibility

My 3 Biggest Stock Holdings

By Brian Feroldi - Mar 11, 2020 at 8:45AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Find out why I'm betting big on these three businesses.

I'm a fan of diversification, which is why my portfolio includes about 65 stocks. I also believe that winners tend to keep on winning, so I'm happy to let my best performers occupy an outsized portion of my portfolio.

How big? My top three holdings -- Mastercard (MA 1.35%), MercadoLibre (MELI -0.73%), and Alphabet (GOOGL -0.27%) (GOOG -0.28%) -- currently make up about 7% of my portfolio each. That's more than 21% of my net worth in just three stocks.

Sound risky? I don't think it is. Here's why I plan on holding on to these winners for years to come.

Businessman holding pen pointing at pie chart

Image source: Getty Images.

Mastercard

Mastercard might go down as one of the greatest businesses in history. As a global payment processor, Mastercard doesn't assume any credit risk whenever one of its cards is used. Instead, the company acts as a key middleman between banks, merchants, and consumers. Mastercard takes a small slice of every transaction on its network, and with $6.5 trillion flowing through its network last year, those small slices add up fast. 

What's wonderful about this model is that it doesn't cost Mastercard much to process one more transaction. This has enabled Mastercard to consistently raise its margins over time and drive outsized growth on the bottom line.

Investors saw this principle on display in the fourth quarter of 2019. Mastercard's revenue grew 16% to $4.4 billion, but margin enhancements (and stock buybacks) helped drive adjusted earnings per share (EPS) up 26%. This is a big reason why analysts believe that double-digit growth can continue for many years to come.

While Mastercard's near-term growth is likely to be impacted by the fallout of COVID-19 (the novel coronavirus), I believe this company remains exceptionally well positioned to continue to thrive over time. 

MercadoLibre

Many American investors call MercadoLibre "the eBay of Latin America," which makes complete sense since this company's platform connects buyers and sellers online. What excites me most about MercadoLibre is that it's rapidly becoming the Paypal and Amazon of Latin America, too.

Mercado Pago, which is the company's payment network, is on fire. In the fourth quarter of 2019, total payment volume surged 64% to $8.7 billion. Better yet, the total number of payment transactions jumped 127% to 285.5 million.

Meanwhile, the rest of MercadoLibre's businesses continue to grow as well. The number of items sold on the platform grew 28% to 109.5 million. Mercado Envios -- which is the company's Amazon-like fulfillment program -- grew its shipments 47% to 92.6 million.

The numbers suggest that these growth rates can remain high for many years to come. E-commerce sales still only account for about 3% of total retail sales in Latin America. For context, that number is about 11% in the U.S. I'm confident that consumers in the region will continue to shift more of their spending online, which plays right into MercadoLibre's hands.

Alphabet

Alphabet owns several of the internet's most valued properties. Between Android, Chrome, Gmail, Google Drive, Google Maps, Google Play, Search, and YouTube, the tech giant possesses eight products that have at least one billion active users each. All of those eyeballs are a gold mine for advertisers, who are willing to pay through the nose to get their products in front of consumers. This explains how Alphabet was able to rack up more than $161 billion in sales in 2019.

With so many cash-cow businesses in place, Alphabet has an almost unlimited budget to fund its various "moon shot" initiatives. From self-driving cars and gaming to medical breakthroughs and energy storage, Alphabet has proven itself more than willing to bet big on high-risk, high-reward technologies. Not all of them will pan out, but the ones that do could be yet another financial windfall for investors. 

Meanwhile, there's plenty of room left for Alphabet to remain in growth mode in its core markets. Only about 50% of advertising dollars are currently spent in digital channels, but that number should continue to grow as more of the world's consumers come online. No company is better positioned to take advantage of that shift than Alphabet, which is why I plan on holding this perennial winner for years to come.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,234.03 (-0.27%) $-6.12
Mastercard Incorporated Stock Quote
Mastercard Incorporated
MA
$322.59 (1.35%) $4.30
Mercadolibre, Inc. Stock Quote
Mercadolibre, Inc.
MELI
$660.13 (-0.73%) $-4.87
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$2,245.13 (-0.28%) $-6.30

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
319%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.