Around five years ago, I decided to build my Stocks and Shares ISA and Self-Invested Personal Pension (SIPP) around a handful of growth stocks. They were among my highest-conviction holdings at the time.
However, I decided to take a different route to just investing in the established Big Tech names that everyone was buying. Back then, this was the ‘FAANG’ group of companies: Facebook (now Meta Platforms), Apple, Amazon, Netflix, and Google (now Alphabet).
Instead, I wanted to back companies that I thought could — one day, potentially — become much larger enterprises. The idea was that these could deliver outsized returns due to their smaller starting size.
So what were these stocks? And how have they got on since I made this decision?
My three big bets
The three firms are Axon Enterprise, MercadoLibre (NASDAQ: MELI), and Shopify. Each had (and still has) founder management teams with long-term visions and a deep understandings of their industries.
They all had leading positions in growing markets. Axon in Tasers, body-worn cameras, and digital evidence management systems. MercadoLibre in e-commerce across Latin America. And Shopify in software that empowers small- and medium-sized businesses to create and manage their online stores.
| Stock | Five-year share price performance (%) |
| Axon Enterprise | 522% |
| MercadoLibre | 286% |
| Shopify | 148% |
In terms of performance, they’ve all beaten the S&P 500 (91%) and Nasdaq (121%).
Axon’s been the best of the lot due to its consistent habit of leaving Wall Street expectations in the dust. In Q2, it reported $7.3bn in future contracted revenue, up from $1bn in Q2 2019.
This trio of stocks have helped propel my portfolio higher, but it’s been far from smooth sailing.
A rough ride
They account for roughly 37% of my overall ISA and SIPP portfolios today. I say roughly because each stock’s expensive according to conventional valuation metrics (they always have been). This means their share prices can fluctuate wildly one month to the next.
Indeed, Shopify lost 84% of its value between November 2021 and October 2022. Ouch!
I added more shares on the way down, but their value kept falling relentlessly. It was very painful. That second position is still underwater for me despite Shopify stock rising 60% over the past 18 months.
A giant in the making
I remain bullish on all three stocks, but I’ve been blown away by the operational performance of MercadoLibre. It owns Latin America’s leading e-commerce marketplace and digital payments platform.
In the past five years, its top line has grown by an average of 60%! Profits are now surging too.
Considering we’ve had a global pandemic, surging inflation, high interest rates, recessions, and more, I find that very impressive.
It shows just how strong the adoption of online shopping and payments is in Latin America. These are powerful trends that appear to still be in the early stages. Millions remain unbanked across the region.
One risk is the company’s rapid foray into digital lending. In Q2, non-performing loans were quite high at 18.5%. So that’s worth monitoring.
Long term though, MercadoLibre’s targeting 300m e-commerce customers, up from about 100m today. It also plans to expand digital advertising, lean into artificial intelligence (AI), and use drones to reach more shoppers.
This post was originally published on Motley Fool
