Top 2 Once-in-a-Decade Consumer Picks for Long-Term Investors

On its face, the stock market looks to be humming along wonderfully. Despite geopolitical turmoil, the S&P 500 index is near all-time highs, driven by gains in artificial intelligence (AI) stocks. But under the hood, there is plenty of pain. From software companies to carmakers to cannabis producers to consumer lenders, many stocks outside of the AI boom are experiencing severe drawdowns.
Two stalwart consumer stocks well off their highs are MercadoLibre(NASDAQ: MELI) and Nintendo(OTC: NTDOY). These drawdowns have created once-in-a-decade buying opportunities for both, making them fantastic choices for long-term investors today. Here's why you should consider buying shares of both companies for your portfolio right now.
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Building on a family friendly gaming empire
Last year, Nintendo released a new gaming device called the Switch 2. It's one of the fastest-selling consoles in history, already selling over 17 million units through the first three quarters of Nintendo's fiscal year, which ends in March.
Investors have soured on Nintendo stock in the interim due to a narrative of a lackluster game lineup and rising memory chip prices, which will hurt the company's input costs for gaming hardware. While it has no control over what memory chips will do, the idea that Nintendo has no games coming for the Switch 2 is misguided.
Nintendo has greatly increased its product development spending on gaming software, including games and its online subscription services. Recently, it launched a new hit called Pokémon Pokopia, which sold 2.2 million units in the first few days of release, putting it on track to become a major profit driver over the next few years as more and more gamers upgrade to the Switch 2.
What's more, Nintendo has greatly expanded its ambitions beyond just gaming into other forms of entertainment. The second Super Mario Bros. Movie is coming out soon, and should do well at the box office. The company also has theme parks and Nintendo stores around the globe, which it hopes will drive more fans to pick up its gaming hardware.
Right now, the Japanese company's U.S.-listed stock is down 36% from its all-time high, even after a recent boost from initial sales of the latest Pokémon game. As a business with increasing momentum and a slate of games across its beloved franchises planned for the next few years -- even if they aren't publicly announced as of yet -- Nintendo looks like a home-run opportunity for investors.
Modernizing commerce in Latin America
Halfway around the world, MercadoLibre operates a vast e-commerce and consumer finance platform across Latin American markets, including Brazil, Mexico, and Argentina.
MercadoLibre's stock has fallen because of management's continued aggressive push to lower consumer costs and reinvest in growth, which is temporarily hurting its profit margins. Operating margin was 11% over the last 12 months, down from a peak of 16% a few years ago.
While investors are right to be concerned about margins, MercadoLibre is seeing the fruits of its aggressive investments in revenue growth. In constant currency, revenue grew 37% in Brazil, 41% in Mexico, and 77% in Argentina last quarter. Financial technology revenue for its MercadoPago subsidiary grew 61%, making it one of the fastest-growing digital finance businesses in the world.
As Latin American markets transition to online shopping and mobile banking, MercadoLibre's revenue will continue to compound at ever-higher levels. Today, you can buy the stock at a price-to-earnings (P/E) ratio of 42. That may seem expensive, but profit margins have been temporarily compressed to help fund its expansion plans.
Over the long term, this revenue growth and a return to profit-margin expansion will help the stock perform well. MercadoLibre currently has a market cap of $85 billion. If revenue can grow from $29 billion today to $60 billion within a few years, with a 15% profit margin, that would yield $9 billion in annual earnings, for a P/E ratio of under 10 based on today's price.
This growth and profitability potential make MercadoLibre stock a can't-miss opportunity right now.
Should you buy stock in MercadoLibre right now?
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Brett Schafer has positions in Nintendo. The Motley Fool has positions in and recommends MercadoLibre. The Motley Fool recommends Nintendo. The Motley Fool has a disclosure policy.