There was excitement on Wall Street when the S&P 500 hit a new high in January after more than two years. But the real story is that it keeps moving up. There’s momentum in the stock market, and with several positive market indicators, there could be high gains this year.
If you want to maximize your portfolio this year, choose solid stocks with high growth potential. MercadoLibre (MELI 0.54%), Chipotle Mexican Grill (CMG 0.68%), and On Holding (ONON 3.25%) are three great picks.
1. MercadoLibre: The other e-commerce leader
MercadoLibre is an e-commerce giant in Latin America that consistently reports high growth. It also has a fintech division that offers digital payments and credit products, and together these make for a growth machine that’s hard to compete with.
The e-commerce business is the older and core business, but the newer payment and credit categories are growing much faster. In the 2023 third quarter, gross merchandise volume accelerated to 69% over the previous year, and items sold increased 26%. It has industry-leading delivery times, with 80% of all orders in Q3 delivered within 48 hours throughout its vast system. More suppliers are joining MercadoLibre’s distribution network, and its managed network increased from 91.9% to 94.2% in Q3. The more orders going through its system, the faster it can get them to customers.
Since MercadoLibre serves 18 different Latin American countries, its business is well-diversified. Argentina has historically been its biggest market, but due to volatility in its economy, growth decelerated to 22% year over year in Q3 in that market. However, growth in Brazil is accelerating, with a 66% increase in sales, and Mexico came in at 40%.
In fintech, total payment volume (TPV) increased 121% year over year, with off-platform TPV up 145%. That represents the company’s fastest-growing segment, and it has a huge opportunity as it powers digital payments for all kinds of transactions off the MercadoLibre platform.
As inflation looks like it’s moderating and spending is healthy, 2024 is set to be another outstanding year for MercadoLibre. In the long term, it has a huge opportunity.
2. Chipotle Mexican Grill: A forever stock
Fans can’t seem to get enough of Chipotle Mexican Grill’s fresh and “real” ingredients. Chipotle consistently reports higher revenue, comparable sales, and profits, and it has continued this performance despite inflation.
The 2023 fourth quarter was another excellent show. Revenue increased 15% over last year, driven by an 8% increase in comparable sales, which is a key telling factor about a popular, well-run operation with future opportunity.
Operating margin expanded from 13.6% last year to 14.4% this year. Restaurant-level operating margin was 25.4%, up from 24% last year. Earnings per share (EPS) rose from $8.02 to $10.21.
Chipotle already runs almost 3,500 restaurants, but it sees the opportunity for 7,000, and it opened 121 new stores in Q4 2023 alone. It has a robust omnichannel system, and 110 of its new stores feature a drive-thru, or “Chipotlane.” That’s a primary element of its growth strategy.
Chipotle was a pioneer of the fast-casual dining trend, and its premium food and pricing have been a hit with its affluent clientele. That’s been a crucial aspect of the company’s ability to withstand inflation and continue demonstrating high growth. It has successfully raised prices to meet rising costs without missing a beat.
Chipotle is coming into 2024 in an excellent position, but it’s really a forever stock that has rewarded shareholders for years and should continue to do so.
3. On Holding: The newest name in premium activewear
If you haven’t heard of On yet, get ready for the newest brand name in athletic wear. On has exploded onto the sneaker scene and developed a huge fan base that swears by its footwear and is willing to pay premium prices for its comfort technology, CloudTec. The Swiss-headquartered company is reporting incredible growth despite the economic climate, and it should only improve when the economy does.
In Q3 2023, sales increased 47% year over year and 57% for the trailing nine months. On’s building a strong brand through its direct-to-consumer channels, which increased 55% in Q3, driving higher total growth. Its resilience and high prices drive margin expansion and profits, and it raised its full-year outlook for sales and gross margin.
On is still a small company, with $1.9 billion in trailing 12-month sales. It has barely penetrated many markets, including the U.S., where it has only 9% brand penetration. But where On does have a brand presence, it’s growing fast. It demonstrated an 82% compound annual growth rate in the U.S over the past two years. It’s quickly making a name for itself, with web site visits in 2023 up 129% versus 2021.
This is still an early stage opportunity, and On stock is down from its first-day closing price. It could soar this year, and it presents a rare long-term opportunity.
