1. MercadoLibre’s High-Growth Opportunity
MercadoLibre operates in thriving Latin American markets like Brazil, Argentina, and Colombia, experiencing a staggering $10.2 billion in net revenue during the first three quarters of 2023. This figure represents a tenfold increase compared to the same period five years prior, signifying the exceptional growth potential it offers.
The company caters to ongoing demands in Latin America, including digital payments and e-commerce, guaranteeing future growth. Notably, MercadoLibre’s operating profit chart demonstrates a remarkable upward trajectory, benefiting long-term shareholders.
2. Axon Enterprise’s Domination in Law Enforcement
Axon Enterprise specializes in providing Tasers, body cameras, and time-saving software to law enforcement agencies across the nation. Breaking into this industry is challenging, as companies must possess a reputable track record to secure contracts, which often endure for considerable periods.
With an established track record, Axon has cultivated a substantial recurring revenue stream from agencies nationwide, continuously expanding its backlog of orders. Moreover, leveraging its reputation, the company is successfully venturing into new opportunities, including federal agencies and international markets, further bolstering long-term shareholder returns.
3. United Rentals’ Steady Growth
United Rentals has been one of the top-performing stocks in the past decade, experiencing a remarkable value increase of over 650%.
In this case, a “boring” industry is favorable since investors tend to overlook it, allowing United Rentals to acquire competitors at attractive prices. This quiet expansion strategy leads to burgeoning market share and, consequently, increased profitability in the future.
Maintaining my shares in United Rentals aligns with this straightforward yet effective approach to creating shareholder value.
4. Crocs’ Profitability at Scale
Crocs, the shoe company, anticipates generating nearly $4 billion in revenue this year, a significant achievement within its industry. Considering its current size, it may not necessarily take the world by storm in the coming years. Nevertheless, Crocs boasts an impressive operating margin of approximately 26%, as depicted in the chart, making it an attractive investment.
With strong profitability, Crocs can undertake value-enhancing initiatives such as share repurchases and debt reduction. Trading at a price-to-earnings ratio of less than 10, the stock remains reasonably priced, exhibiting potential for even modest growth. A substantial decline in its valuation appears unlikely.
5. Tanger’s Solid REIT Fundamentals
Tanger’s tenant base primarily consists of discretionary sector companies, which involves inherent risk. Nonetheless, the company has consistently maintained an exceptional occupancy rate of around 98%, which held true at the end of the third quarter of 2023.
As a Real Estate Investment Trust (REIT), Tanger must distribute a portion of its profits as dividends. At present, it yields around 4%, but there is the potential for substantial increases. Returning to its pre-pandemic dividend level would require an uplift by almost 50%, and given the rebound in business, this seems plausible. Additionally, consistent rent increases can further amplify dividends by generating extra cash flow.
Over time, the poorer investments in my portfolio have declined in value, while the five stocks mentioned here have performed remarkably well. By maintaining this approach without interference, my portfolio has inevitably concentrated around these winners.
Given my positive outlook for these top holdings, I don’t intend to sell or reduce any of these positions in the upcoming year. Doing so would pose a greater risk as selling shares of successful companies prematurely would deprive me of the substantial potential ahead.