Few things are as exciting as the thought of an investment changing your life. But some have such dramatic returns, they are literally millionaire makers.
A handful of examples come to mind. Amazon (AMZN 3.43%) returned more than 147,000% since its initial public offering (IPO). MercadoLibre (MELI 3.09%) soared more than 5,500% in its young lifetime. Meanwhile, ASML Holding (ASML 2.04%) cranked out over 32,000% between capital gains and dividends.
But you don't have to look for the next big thing. Each of these winners can still create life-changing returns, and here is why.
Breaking down Amazon's revenue
Jake Lerch (Amazon): Amazon has made its share of millionaires. In fact, it's made its share of billionaires, too. And when I think of companies that can keep making millionaires in the future, it tops my list.
Let's start with the obvious: Amazon is already a massive company. It has a market cap of $1.5 trillion, making it the fourth-largest American company, trailing only Apple, Microsoft, and Alphabet, the parent company of Google.
In truth, Amazon is really four (or more) companies in one.
Consider the different ways it makes money -- what finance types call its "revenue streams."
Amazon has four big ones:
- Retail: This includes the company's sprawling e-commerce business, physical stores (like Whole Foods), and third-party seller services (e.g., commissions and shipping/fulfillment fees).
- Subscription services: This includes the company's flagship Amazon Prime, along with Prime Music, Prime Video, Audible, and Amazon Gaming (formerly Twitch).
- Amazon Web Services (AWS): This includes the company's fast-growing, high-margin cloud services business -- the biggest cloud services provider in the world.
- Advertising: This includes revenue generated by selling ads on the Amazon app and website (i.e., sponsored products in search results) as well as audio and video ads on streaming content.
Crucially, the fastest-growing segments for Amazon are also the most profitable ones. AWS is growing at 13% year over year, subscription services at 15%, and advertising is soaring by 26%.
Without doubt, Amazon's enormous e-commerce business is central to its strategy. However, its three other business segments increasingly drive revenue growth, earnings, and free cash flow.
And that's great news for investors, because it allows the company to ride massive secular growth trends in digital advertising, cloud services, and media streaming.
In other words, Amazon has set the stage for decades of growth to come -- growth that could lead to lots of millionaires.
MercadoLibre is making millionaires, too
Will Healy (MercadoLibre): Minting millionaires is nothing new for MercadoLibre. If you had bought $20,000 worth of stock at the 2007 IPO price and held, your position would be worth more than $1 million today.
However, despite this growth, it is far from achieving a record size. At a current market cap of approximately $80 billion, it is just over 5% of the value of rival Amazon's $1.5 trillion market cap.
MercadoLibre began in 1999, a few years after Amazon began selling books. It pioneered e-commerce and other activities in its region and expanded its ecosystem across Latin America.
Since its cash-based customers needed a way to buy online, it became a fintech pioneer by starting Mercado Pago and offering financial products. Its offerings facilitated online purchases for customers without bank accounts or credit cards. Likewise, the need for order fulfillment and faster deliveries led to the establishment of Mercado Envios.
Thanks to that solutions-based approach, MercadoLibre built businesses that can succeed separately or grow by leveraging synergies with other segments of the company.
Moreover, it has also drawn success from addressing Latin America's challenges. For example, its logistics arm, Mercado Envios, brings same-day or next-day shipping to areas that did not previously have it. Also, Mercado Pago offers interest-bearing investment accounts in Argentina, which have helped residents cope with the hyperinflation in that country.
While nobody can guarantee that such solutions will help MercadoLibre reach a $1.5 trillion market cap like Amazon, its growth is unlikely to slow significantly anytime soon. The company's $822 million in net income in the first three quarters of 2023 rose 159% year over year.
That profit growth may have contributed to MercadoLibre stock rising by more than 85% this year. Furthermore, its price-to-earnings ratio is 80, giving it a comparable earnings multiple to Amazon, a stock that sells at approximately 75 times earnings. Hence, one may be able to justify that P/E ratio given MercadoLibre's triple-digit profit growth.
In the end, its smaller size and higher-percentage profit increases mean growth should come more easily to the internet and direct marketing retail stock. Such factors should help drive MercadoLibre's stock price higher, thus minting more millionaires.
This company is the unsung hero of the AI revolution
Justin Pope (ASML Holding): Chip companies like Nvidia exploded this year because investors realized it takes high-end, complicated chips to power complex artificial intelligence (AI) models. But have you thought about the company that makes the machines that make the chips? ASML Holding specializes in designing and selling photolithography machines for making advanced semiconductors.
ASML Holding has a practical monopoly on this technology. Its overall semiconductor lithography equipment market share is over 80% and even higher on advanced applications. That means, whether it's Nvidia, Advanced Micro Devices, or someone else coming out with the latest and greatest AI chips, it's almost certainly ASML's machines working behind the scenes.
That's exciting because AI is likely to explode over the coming years. According to research by Goldman Sachs, extreme ultra-violet lithography (EUV) technology will build the advanced AI chips of the future. Funny enough, Moody's estimates that ASML Holding has a 100% market share of EUV machines, making it an obvious winner if AI reaches its potential.
ASML isn't a small company, with a $274 billion market cap. But don't underestimate the potential growth a monopoly on the machines powering a trillion-dollar industry can create. Investors should consider hitching their portfolios to ASML Holding as a potential millionaire maker over the next few decades.
