2 Top Stocks to Buy and Hold Right Now

The stock market dropped sharply on Monday as Wall Street pondered the potential impact of a situation brewing in China. Specifically, some analysts believe that the heavily indebted Evergrande Group, one of China's largest property developers, will default on its interest payments in the near future. If that happens, the economic fallout could impact banks (and economies) around the world.

Regardless, there is a silver lining for long-term investors. Every past downturn has ended with the market hitting new highs, meaning every past downturn has been a buying opportunity. With that in mind, MercadoLibre (MELI 0.87%) and Twilio (TWLO 1.84%) look like smart long-term investments to buy into right now.

Here's why.

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1. MercadoLibre

MercadoLibre has been described as the Amazon of Latin America, and while it's not a perfect comparison, it does convey the magnitude of the company's market presence. On average, 667 million people visit the MercadoLibre marketplace each month, more than triple the web traffic received by the next closest competitor.

So how did the company achieve that scale? First, MercadoLibre has its own integrated payments platform, Mercado Pago. This service streamlines digital transactions in a region where relatively few people have bank accounts and debit cards. In fact, Mercado Pago is so popular that it has expanded off-platform, meaning consumers can use the mobile wallet to make purchases at other locations (both in stores and online).

Second, the company has invested heavily in its fulfillment and logistics business, Mercado Envios, which serves 6 countries in Latin America. This helps control shipping costs, but it also streamlines the delivery process for sellers, which creates a better experience for buyers.

Finally, MercadoLibre offers a number of other services, including access to financing and a platform for digital advertising. Collectively, these products create a robust commerce ecosystem, giving merchants all the tools they need to manage a business across physical and digital channels.

Not surprisingly, MercadoLibre has posted strong financial results like clockwork.

Source: YCharts. TTM = trailing-12-months. CAGR = compound annual growth rate.

Since 2018, MercadoLibre's take rate has expanded from 12% to 24%, meaning the company is keeping a greater percentage of gross merchandise value (i.e. the sum of all transactions powered by its platform). This highlights its strong competitive position.

Looking ahead, MercadoLibre is well-positioned to maintain that momentum. As more people in Latin America adopt online shopping and digital payments, MercadoLibre should see strong demand. That's why this stock looks like a smart investment right now.

2. Twilio

Twilio is a pioneer in cloud communications. At the core of its platform is the Super Network, a software layer that sits between global telecom networks and the internet, connecting the two technologies. This allows developers to add communications (e.g. voice, video, messaging) to their own software without the cost and complexity of writing specialized code, managing on-site hardware, or negotiating deals with carriers.

In short, Twilio democratizes communications by virtualizing legacy telecom infrastructure, helping clients engage their own customers through a variety of channels. For instance, Twilio's platform is used to build contact centers, send notifications and alerts, and drive customer loyalty through automated email marketing campaigns.

Recently, the International Data Corp. (IDC) recognized Twilio as the leader in the communications platform as a service (CPaaS) market, citing greater capabilities and a stronger growth strategy than any of its rivals. The report also mentions that Twilio's top-line growth outpaced the industry average of 35% in 2020, meaning the company is still taking market share.

More importantly, Twilio has posted strong revenue growth over the last three years, though free cash flow remains negative.

Source: YCharts. TTM = trailing-12-months. CAGR = compound annual growth rate.

The IDC also noted that Twilio's recent acquisition of Segment will further differentiate the company from its rivals. Segment operates a customer data platform (CDP), a tool designed to collect and unify customer data from disparate sources. As part of Twilio's portfolio, this product will help clients deliver more personalized and timely communications to their own customers.

Collectively, management values the company's addressable market at $87 billion by 2023, leaving Twilio with plenty of room for future growth. And as the industry leader, the company should see strong demand in the coming years as more companies adopt digital solutions. That's why this growth stock looks like a smart long-term investment.