Want to Beat the S&P 500? Buy These 3 Unstoppable Stocks | The Motley Fool (2024)

The S&P 500 is up 10% so far this year, extending its decades-long track record of reliable wealth creation. If you had invested $1,000 in an S&P 500-based index fund and let it grow over the past 10 years, you'd have seen an annualized return of nearly 13%.

However, that same investment in the right growth stocks could've beaten the market by a wide margin. For most investors, it makes sense to have a portion of your portfolio in a trusty fund that tracks the broad market. But they should consider complementing that position with individual stocks that could accelerate their returns. MercadoLibre (MELI -1.29%), Dutch Bros (BROS -1.66%), and Nu Holdings (NU -2.06%) are three top stocks that have incredible market-beating potential.

1. An e-commerce giant that's not Amazon

MercadoLibre is the reigningleader of e-commerce in 18 Latin American countries. Since many of its markets are still underpenetrated, it has been able to deliver consistently high growth year after year. While that opportunity is far from being fully tapped, the company is also entering new markets that are growing even faster than its core e-commerce business.

Total revenue increased 36% year over year last quarter, or 94% on a currency-neutral basis. That was driven by a 20% increase in gross merchandise volume (GMV) and a 35% increase in total payment volume (TPV).

There's still tons of opportunity in e-commerce. The industry's penetration in MercadoLibre's markets lag well behind other regions like China and the U.S. As the company extends its market lead with more products and better delivery options, customer engagement is rising.

However, the payments business is MercadoLibre's biggest growth generator right now, and there are even bigger opportunities here. In Brazil, for example, the established big banks are losing share in credit card TPV, while fintech disruptors are gaining. MercadoPago's monthly active user growth accelerated to 38% last quarter, and that should power future results for the segment. MercadoLibre recently announced that it began the process to obtain a banking license in Mexico, marking another opportunity for growing its fintech segment.

The future looks wide open for the company, and if you invest now, you'll thank yourself in a few years.

2. Fun coffee at better prices

Dutch Bros is a fairly small coffee chain with 876 stores as of the end of the first quarter. But it has distinguished itself and its brand, which is growing quickly and catching on with customers.

The company has reported high revenue growth since going public in 2021, but much of that has been due to new store openings. While that's a typical growth avenue for restaurant brands, Dutch Bros' comparable sales figures have been less compelling. There are a number of factors at play here, including the inflationary environment that's posing challenges for much of the industry in its quest to get customers to accept rising prices.

But Dutch Bros has repeatedly attributed its low and sometimes negative comps growth to what it calls a fortressing strategy, where the company opens a flurry of new stores in one area to establish a brand presence.

And in the first quarter, comps growth accelerated to 10%.

The company recently brought on a new CEO to lead its expansion, and it's scaling efficiently and profitably. Revenue increased 39% year over year in the first quarter, and it reported net income of $16.2 million after suffering a $9.4 million loss a year ago. Dutch Bros opened 45 new stores during the quarter and plans for up to 165 openings for the full year.

With a long-term goal of reaching 4,000 locations, Dutch Bros stock offers plenty of opportunity.

3. Financial services for the digital era

Nu, like MercadoLibre, offers financial services in Latin America. Right now, it operates in Brazil (where it's headquartered), Mexico (where it also recently applied for a bank license), and Colombia. Nu is one of the top beneficiaries of Brazil's move away from large banks to fintech disruptors, and it counts more than half of the entire adult population of Brazil as members.

The company also benefits from high engagement among its members with an 83% activity rate, meaning 83 out of 100 members engage with Nu's platform on at least a monthly basis.

That engagement also drives higher revenue, lowers costs, and increases profitability. Revenue increased 69% year over year in the first quarter, and net income more than doubled to $379 million. Adding 20.2 million members in just the past year, Nu also saw an increase to its average revenue per active user (ARPAC), another measure of how members are adding services and engaging at higher rates with the company.

Nu has no plans to slow down. It's launching new products and entering new markets, opening the door to market-beating returns for the foreseeable future.