Given Charlie Munger's decades of success, investors often turn to him for guidance. One of the more interesting pieces of advice involved what investors should not do. Instead of actively trading all the time, Munger advised, "The big money is not in the buying and the selling but in the waiting."
Admittedly, "waiting" may not sit well with active investors who might feel an emotional need to do something. Also, they might truly want to act if developments alter the investment thesis.
Nonetheless, investors have sometimes earned massive returns from not reacting to news that could wipe out almost all of a stock's value. For example, Amazon has prospered despite losing more than 90% of its value at one point.
Ultimately, the decision to hold comes down to whether a company has the strategic vision and leadership to make its investment thesis work regardless of a stock's performance. While conditions can always change, the investment cases for Shopify (SHOP 1.11%), Palantir Technologies (PLTR 3.73%), and MercadoLibre (MELI 3.09%) should hold up even if these stocks experience a temporary bear market.
Shopify
Shopify is the "anti-Amazon." Its platform allows e-merchants to set up sales sites independently without using Amazon or another large provider to support it.
Shopify should benefit investors who wait because it stands out for its highly customizable platform that does not require coding skills. It also operates an ecosystem that can support inventory management, email marketing, payments, and other functions necessary for an online business. Such capabilities probably helped make it the No. 1 e-commerce platform in the U.S., according to BuiltWith.
Additionally, its revenue of $3.2 billion for the first half of the year rose 28% versus the same time frame in 2022. Had it not been for a $1.3 billion impairment charge from selling its logistics business, it would have earned a positive net income.
While the stock has risen by about 55% this year, it still sells for 70% less than its all-time high. Also, its 11 price-to-sales (P/S) ratio is low by historical standards. These conditions not only indicate that good returns could come to those who wait, but it may also be an excellent time to add shares in this software-as-a-service (SaaS) stock.
Palantir Technologies
Exercising patience may also pay off for Palantir shareholders, thanks to the company's artificial intelligence (AI) capabilities. The platform had long led the way in AI and machine learning (ML) as it employed these technologies to run analyses and recommend courses of action. Through that technology, it has discovered insights within the national security sphere and helped corporate clients find efficiencies.
Additionally, Palantir took its AI capabilities to a new level by releasing its AIP module. This software added analysis of large language models (LLMs) to its suite of AI capabilities, enhancing Palantir's tools.
Admittedly, while revenue growth fell in recent quarters, the first half of 2023 still saw revenue rising 15% on a year-over-year basis, to $1.1 billion. Both quarters yielded a combined profit of $47 million. Since Palantir only recently turned profitable, that net income figure will probably grow quickly for the foreseeable future.
That anticipation likely contributed to the 175% growth in the stock price so far this year. Also, with the stock price 60% below its all-time high, investors can still buy at a substantial discount.
Indeed, Palantir might appear expensive with a 19 P/S ratio and a 78 forward P/E. Still, that is a moderate sales multiple by historical standards, and the forward P/E should fall amid anticipated profit growth. If investors can wait for profits to grow significantly, Munger's advice should serve them well.
MercadoLibre
Latin American conglomerate MercadoLibre has delivered investors a 4,200% return since its 2007 initial public offering (IPO). Despite that success, it may have just scratched the surface of what it can accomplish in its home region.
The company was a first mover in both e-commerce and fintech in the region. Also, it later added a logistics business and advertising on its platform. These businesses form synergies that bolster each other and earn significant returns separately.
Additionally, the separate businesses thrive from regional challenges. It offers fintech services to cash-based customers. Also, the logistics business brought same-day and next-day shipping where it did not previously exist.
These offerings helped it generate net revenue of $6.5 billion in the year's first two quarters, rising 33% yearly. And as a newly profitable company, the $463 million earned during the period rose 146% over the same time frame.
Amid that increase, the stock price is up over 45% this year. Also, at a P/S ratio of 5 and a 62 forward P/E, investors will likely see massive growth from that premium price. Hence, the more patient you are, the larger your potential return could be with this internet and direct marketing retail stock.
