3 Stocks That Are Definitely Worth Buying If the Market Selloff Continues

A sell-off is never fun, but the smartest investors know that it’s also an opportunity. Once you’ve gotten over your initial fears, your next step should be to start looking for opportunities.

If the market continues to decline in the coming weeks and months, Costco Wholesale (COST 0.14%), MercadoLibre (MELIA 0.76%)AND Internet shop (STORE 2.33%) there are three stocks worth keeping an eye on. They may look expensive now, but if they fall, be ready to pounce.

1. King of stock models

If you’re one of the 134 million cardholders who shop at Costco Wholesale, you’ve probably been taken in by the warehouse giant’s low prices and service. More and more shoppers are jumping on board with Costco, leading to higher sales and profits, despite inflation.

Membership grew 7.8% year over year in the third quarter of fiscal 2024 (ended May 12), and fee income increased 7.6%. Sales increased 9.1% in the quarter, driven by a 6.6% increase in comparable sales (comps). Earnings per share (EPS) also increased 29% to $3.78.

The retailer’s strong momentum carried over into the current quarter. Costco has been providing monthly updates on some metrics, with sales up 7.1% year over year in July, up 5.2% year over year. E-commerce has been growing rapidly for the company, with sales from that channel up 20% last month.

While Costco has seen some pressure from shoppers holding back on larger, more expensive items, shoppers have continued to flock to warehouse clubs to make the most of their memberships, which is why traffic was up 6.1% in the quarter while the average ticket price was about the same.

The company enjoyed positive media coverage when it announced a special dividend of $15 per share. It recently raised its membership fee from $60 to $65. Management had been delaying the price increase while buyers struggled with inflation, but the company believes it can provide more value to members by using the proceeds from the increase to improve the business.

The one factor that usually holds back investors is Costco’s valuation. Its stock is trading at a premium of 53 times its trailing 12-month earnings. If Costco is dragged down by a broad market sell-off, the stock will undoubtedly be attractive.

2. Supporting e-commerce in Latin America

MercadoLibre is a global e-commerce leader, but its focus on Latin America means you may have never heard of it. It serves 18 countries, running an online business similar to Amazonand also offers popular fintech services that complement its e-commerce activities.

Even though MercadoLibre has just celebrated its 25th anniversary, it is still developing like a much smaller and younger business. It benefits from operating in a huge market that is still poorly penetrated by e-commerce. And after years spent building a large fulfillment network, the company can deliver products to buyers quickly and at a low cost.

Total merchandise volume (GMV) has grown at a staggering 28% compound annual growth rate since 2016, and in Q2 was up 20% year-over-year, or 83% on a currency-neutral basis. Engagement is increasing with more active shoppers, more shoppers across categories, and higher purchase frequency.

The fintech business is growing even faster, with total payment volume (TPV) growing by 36% (86% currency neutral) in the last quarter. MercadoLibre is constantly introducing new services, adding customers and sales. This creates more opportunities for cross-buying and engagement. One of its latest ventures is the opening of a digital bank in Mexico, where it already has a significant presence in digital payments and plans to become the leading digital bank in the country.

MercadoLibre is in high growth mode and looks like a strong buy even at its current price. The stock has been relatively stable during recent volatility, but any pullback would be an opportunity that investors shouldn’t miss.

3. Driving the e-commerce revolution

Shopify is the name of many online stores, providing its customers with the infrastructure to benefit from the long-term growth of e-commerce. However, it has expanded from being a full-service e-commerce store to offering solutions and packages for businesses of all sizes and is gaining enterprise customers. As e-commerce grows its share of total retail sales, Shopify is poised to maintain its impressive momentum.

But the company has spent the last few years recovering from the missteps of the pandemic. Like many companies that expanded aggressively to meet surging demand in the early months of the global crisis, it was forced to scale back and focus on profitability when its pandemic-era growth proved unsustainable.

Shopify’s latest earnings report suggests continued progress. It just announced phenomenal second-quarter results that exceeded expectations across the board. Revenue was up 21% year over year, and GMV was up 22%.

Profitability metrics were also excellent. Gross margin increased year over year from 49.3% to 51.1%, free cash flow increased from $97 million to $333 million and operating income was $271 million after a loss of $1.6 billion in the year-ago quarter (resulting from the sale of the logistics business).

The stock is trading at a premium of nearly 12 times trailing 12-month sales and 52 times forward earnings. While Shopify is already a great growth stock, it will be a no-brainer if the stock is dragged down by a broad market decline.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil holds positions in MercadoLibre. The Motley Fool holds positions in and recommends Amazon, Costco Wholesale, MercadoLibre, and Shopify. The Motley Fool has a disclosure policy.