The year is almost over. And with more than 10 months in the record books, one thing is clear: Growth stocks have once again bested their value stock siblings.
Consider the performance of the Vanguard Growth ETF as compared to its sister fund, the Vanguard Value ETF. The growth fund has a total return of 36% year to date, while the value fund is effectively flat.
For investors looking to add a couple of long-term growth stocks to their portfolios now, here are two names I'd strongly consider.
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MercadoLibre
When it comes to growth stocks worth holding for a decade or more, MercardoLibre (MELI 3.09%) ticks all the boxes.
First, the company, which operates an e-commerce platform across Latin America, is growing like a weed. In the third quarter, MercardoLibre blew away expectations.
- Revenue grew by 69% year over year to $3.8 billion on a currency-neutral basis.
- Unique active users increased by 36% to 120 million.
- Currency-neutral gross profits soared 85% year over year to $2 billion.
A multifaceted approach underlays the company's success. MercardoLibre operates not only as an e-commerce platform but also as a fintech platform. In its most recently reported quarter, fintech services, products, and credit revenues topped $1.6 billion -- roughly 42% of its total revenue.
Like other e-commerce platforms such as Amazon, MercardoLibre also benefits from the growth of the digital advertising market. The company recorded a 70% increase in advertising revenue in Q3. That's important, because, as the company notes, advertising is higher margin than other forms of revenue. Its increasing ad revenue was a key driver of the company's overall gross margin increase to 53%.
All that said, MercaroLibre isn't a stock for everyone, in part due to its valuation. Shares trade at a trailing price-to-earnings (P/E) ratio of 70 and a forward P/E of 41.
However, for investors willing to hold for the long term and accept the volatility that comes with owning an up-and-coming growth stock with a great deal of exposure to Latin America, MercardoLibre is a name worth considering.
Visa
Contrary to popular belief, it's possible for a company to be a fantastic growth stock without being a relatively young, hyper-growth newcomer. Take Visa (V -0.23%) as an example.
Over the last 10 years, few stocks have matched this old-school fintech giant's performance. Its shares have returned an eye-popping 425%, so a $10,000 investment made in 2013 would be worth more than $52,000 today. The stock has clocked a compound annual growth rate (CAGR) of 18% -- leaving the S&P 500's 11.6% CAGR in the dust.
V Total Return Level data by YCharts.
What's more, Visa's growth shows no sign of slowing down. The company's immense payments network represents a nearly impenetrable moat. In its fiscal 2023 fourth quarter (which ended on Sept. 30), Visa processed credit and debit card transactions totaling $3.2 trillion, up 9% year over year. From that total, Visa extracted transaction and processing fees that fed its $8.6 billion in quarterly revenue.
Even so, current economic conditions, with higher interest rates and the lingering impacts of the recent inflationary surge, pose a difficult test for a Visa's payments business -- but it's passing the test with flying colors.
Indeed, the company's board of directors recently approved a new $25 billion share repurchase plan, after buying back more than $4 billion worth of common stock last quarter. The plan will continue Visa's strategy of reducing its outstanding share count -- thus driving up the value of remaining shares. Visa decreased its total shares outstanding by 18% over the last decade.
V Shares Outstanding data by YCharts.
In short, Visa is poised to keep making its shareholders happy by delivering above-average returns thanks to its straightforward business model and enormous moat. Growth investors looking for a smart place to invest for the long term should keep Visa top of mind.
