Just because a stock has outperformed the market over the past year doesn't necessarily mean it's expensive. In fact, some of the stocks in my portfolio that have produced the best returns could still be the best investment opportunities for long-term investors to take advantage of now.
With that in mind, here are two stocks that I already own that I still think could be "cheap" from a long-term perspective. In fact, one of them is already one of my largest stock investments, and I plan to add to my stake in it this year.
An incredible commerce company with room to grow
MercadoLibre (MELI +3.74%) is one of the top five stock investments in my portfolio, and it's an impressive business. It often gets referred to as the "Amazon of Latin America" because of its market-leading e-commerce business in Brazil, Argentina, and other countries, but there's a lot more to it. It also has a payments platform that processes nearly $200 billion in annualized volume, a logistics platform, a credit business, and a digital storefronts platform.
NASDAQ: MELI
Key Data Points
Although MercadoLibre has grown tremendously, it still has excellent momentum. In the third quarter of 2023, MercadoLibre's marketplace generated 59% year-over-year growth in gross merchandise volume, while payment volume on its Mercado Pago fintech platform more than doubled. And this is a highly profitable business, with an 18% operating margin.
MercadoLibre could still have lots of room to grow. Many of its markets are still in much earlier stages of e-commerce and mobile payments adoption, and the more people join the platform, the stronger its network effect is. Its recently revamped Meli+ subscription product (its equivalent to Amazon Prime) is especially exciting as a future revenue driver, and I'm excited to watch the business grow.
There's a lot to like about this true disruptor
Shares of Redfin (RDFN +0.00%) are up by 41% over the past year, but the stock price is still a small fraction of the peak it hit in 2021, when the market was extremely hot. And while I don't necessarily think it will take out its all-time high anytime soon -- doing so would require 10-bagger returns from here -- there's a lot to like about Redfin ahead of the peak spring/summer homeselling season.
NASDAQ: RDFN
Key Data Points
For one thing, while homebuying activity has recently slumped to near an all-time low, that could change. Mortgage rates have already fallen considerably from their cyclical peak above 8% in October, and mortgage giant Fannie Mae recently said that it now expects 30-year mortgage rates to fall to 5% by the end of the year. A more active real estate market would undoubtedly be a positive catalyst for Redfin. Plus, the company has been making excellent strides toward profitability recently, and a stronger market environment could help it achieve its goal of GAAP (generally accepted accounting principles) profitability this year.
Finally, and perhaps most significantly, consumers are finally starting to pay attention to real estate fees, thanks to high-profile lawsuits against the National Association of Realtors and some top brokerage firms. In a nutshell, the long-standing practice of forcing sellers to pay commissions to buyers' agents is being aggressively challenged. If those challenges are successful, they could change the real estate business forever. And a fee-competitive environment would be a good thing for a company that essentially declared war on real estate commissions years ago.
Don't expect a smooth ride
Both of these companies are still in relatively early stages of capturing their market opportunities -- although MercadoLibre is certainly the more mature of the two. Even if things go well, they are likely to experience significant ups and downs as they grow, and both stocks have histories of being more volatile than the broader market. However, I believe investors who buy shares of MercadoLibre and Redfin at these levels will be very glad they did in a decade or so.
