3 Growth Stocks to Buy and Hold Forever

Finding new growth stocks to add to your portfolio usually isn’t too difficult. Finding growth stocks to buy and hold forever, however, can be another story. The core company must be able to evolve over time as its market changes. Just ask Xerox, Kodak and Blockbuster.

With that as a backdrop, here’s a list of three growth stocks you can buy and comfortably hold for life. Not only do these organizations run businesses that are always in search, but each has proven their willingness and ability to change as needed to continue to grow.

In no particular order…

1. Amazon

It’s a stock pick so commonly suggested that it’s almost become a cliché. However, Amazon (AMZN -1.67%) it is an investor favorite for all the right reasons. Not only is it the largest e-commerce company in the US (with about 40% market share, according to eMarketer), but its streak of sales growth remains almost perfectly unbounded.

AMZN Revenue Data (Quarterly) by YCharts

Of course, its cloud computing arm — Amazon Web Services — has a lot to do with this continued growth. AWS accounts for about two-thirds of the company’s operating income, although it only contributes about 18% of revenue. The e-commerce side of the business is obviously not hugely profitable.

It just doesn’t matter.

See, profitability (or lack thereof) isn’t a terribly important part of the argument for or against owning Amazon stock. The reason this company is such a large holding company forever is its digital ecosystem that makes it so easy to become and stay a customer. There’s a reason Amazon Prime customers are eligible for free shipping on their online purchases, and it is not because Amazon is interested in public service. It’s because these subscribers end up spending more than non-Prime shoppers.

There’s also a reason why Amazon can collectively charge its third-party sellers about $13 billion a quarter now to feature their goods prominently on Amazon.com. This is the fact that approximately 300 million people shop at one of its sites on a (very) regular basis. Web traffic measurement team Semrush reports that Amazon.com alone was visited 3.23 billion times in August.

Given that well-established habits are hard to break — especially when they are for to be sticky — Amazon is likely to maintain its primary lead in the North American e-commerce market as it continues to grow. It’s just that there is no rival in a position to threaten the company.

And its core market is almost certain to continue to grow. Despite the maturity of the business, the US Census Bureau reports that e-commerce still accounts for only about 16 percent of the nation’s total retail sales. That leaves tons of room for more growth.

2. MercadoLibre

While Amazon may be the dominant e-commerce name in North America, know that dominance only applies here. Outside the US, no. Indeed, a company called MercadoLibre (MELI -1.69%) it is often referred to as the “Amazonia of Latin America” ​​in recognition of its Amazon-like control over this geographic market.

As the unofficial comparison suggests, MercadoLibre operates an online shopping platform that serves Argentina, Brazil, Mexico and Panama, along with several other Central and South American nations that might otherwise remain untapped.

To call it the Amazon of Latin America, however, does not do it justice. In many ways, MercadoLibre is also comparable to eBay, Shopifyand PayPalby virtue of providing merchants with a means of doing business with online shoppers in the region. For perspective, the company’s e-commerce platforms facilitated sales of $12.6 billion worth of products and services in the second quarter of this year, while the payment platform brokered $46 billion in remittances and transfers. .3 billion dollars. The increase pushed the company’s top line up 42% year over year, and 113% higher excluding the impact of currency fluctuations. This improvement extends the growth periods that have been in place for some time.

This growth is also expected to persist for at least a few more years as Latin American e-commerce markets explode following the proliferation of broadband-enabled smartphones. eMarketer estimates that e-commerce sales in Latin America will grow from $180 billion this year to more than $260 billion in 2028. MercadoLibre is positioned to capture at least its fair share of that growth, if not More than the fair share.

As for why this company does what Amazon and other outside players can’t, it’s not complicated. MercadoLibre was founded by people who live in this market and built from the ground up to serve consumers who may think and act differently than US consumers do. This awareness of local norms and preferences can count for a lot.

3. PepsiCo

Last but not least, add the beverage giant PepsiCo (PEP 0.18%) to your list of growth stocks to buy and hold forever.

Of course, it broadens the definition of what qualifies as a growth stock. It is more often than not classified as a value name, with its sizeable forward dividend yield of 3.2% only strengthening the value argument. It doesn’t even matter that that bigger rival Coca cola is the most commonly suggested choice between the two beverage companies.

However, given the likely net upside you could get by reinvesting PepsiCo’s dividends into more stocks, it might be worth a look from a different angle.

PepsiCo is, of course, the parent of namesake cola, as well as popular beverages like Mountain Dew, 7UP, Bubly water, and Gatorade, to name a few. It’s also parent to the Frito-Lay snack chip company, the name behind Lay’s potato chips, Doritos, Cheetos and others. Although PepsiCo’s chip business is the smaller of the two arms, it’s an excellent mix of products aimed at the same core consumer.

It’s also distinctly different from its top rival in another way. While Coca-Cola outsources most of its production and other front-line activities to third-party bottling partners, PepsiCo owns most of its bottling operations, maintaining close control over its packaging process. This ultimately translates into lower profit margins (bottling operations are expensive to run these days), but it allows the company to fine-tune every aspect of the production process. It even allows the company to undertake revenue-generating bottling duties for beverage brands other than its own.

And this flexibility it is making a fiscal difference. PepsiCo’s dividend growth has quietly outpaced Coca-Cola’s for quite some time. Some of the credit goes to PepsiCo’s more aggressive share buyback efforts. Much of the credit, however, simply comes from PepsiCo prioritizing increasing its dividend payments funded by predictable control of its business.

PEP Dividend Data by YCharts

More importantly for investors, PepsiCo’s 52-year streak of annual dividend increases has proven very fruitful for investors who have reinvested those payouts. A $10,000 investment in PepsiCo stock in 1984 would be worth nearly $1.7 million today if you used its cash dividends to buy more stock. While it takes some time and patience to achieve this, the resulting average annualized net return of around 12% is certainly characteristic of a growth stock.