With 2024 fast approaching, I’ve been checking my best stock market performers of 2023 (so far). Pleasingly, there have been a few — notably growth stocks — that have rebounded strongly since January.
As usual, though, I’m also holding a few duds:
- Butterfly Network (down 55% year to date)
- Schiehallion Fund (down 42%)
- Ocado (down 33% since I invested in August)
This proves how important diversification is. But the following stocks also prove that the winners can more than make up for the laggards.
Nvidia up 201%
First up is Nvidia (NASDAQ: NVDA), whose share price has more than trebled this year.
It designs the chips that are used to train generative artificial intelligence (AI) systems. So its data centre business took off like a rocket after the release of ChatGPT.
In fact, the growth has been breathtaking. In Q3 last year, it posted revenue of $5.9bn. This year, management is guiding for Q3 revenue of $16bn. That’s not bad for a 30-year-old company!
Looking forward, Nvidia’s chips have enormous potential in self-driving cars, cloud gaming, the metaverse and the rearchitecting of data centres.
Now, the firm does compete with Advanced Micro Devices, another cutting-edge chip firm. So it will need to keep innovating relentlessly to stay at the top.
Plus, new US regulation is preventing Nvidia from selling its most powerful AI chips in China. This could reduce its total addressable market.
Shopify up 72%
Next up is e-commerce enabler Shopify (NYSE: SHOP). The firm powers millions of online stores, including big brands like Kylie Cosmetics, Gym Shark and Tesla.
The stock has surged this year as the company has offloaded its capital-intensive logistics business. This has helped improve profitability. For example, Q3 operating income was $122m compared to an operating loss of $346m a year ago.
Also encouraging is that Shopify hasn’t seen a meaningful drop-off in subscribers after raising prices on its monthly plans earlier this year.
Meanwhile, its gross merchandise volume (GMV) — the total volume of merchandise sold on the platform — rose 22% to $56.2bn during the third quarter.
One concern with the stock is its rich valuation. It’s currently trading on a price-to-sales (P/S) ratio of 11.7, which suggests it’s priced for perfection. The share price could pull back sharply if Shopify were to miss earnings expectations.
MercadoLibre up 66.5%
Finally, we have MercadoLibre (NASDAQ: MELI), known as the Amazon/Shopify/PayPal of Latin America.
Incredibly, the company grew its revenue by around 650% between 2017 and 2022. But growth has continued briskly this year too.
Here are the figures from its most recent quarter (all on a currency-neutral basis):
- Net revenue of $3.8bn, up 69% year on year
- Income from operations of $685m, with an 18% margin
- $47.3bn total payment volume, up 121%
- $11.4bn in GMV, an increase of 59%
Like Shopify, a crucial factor here is that this growth is now profitable. MercadoLibre’s income from operations has more than doubled for four successive quarters.
Of course, I can’t ignore the operational risks here. Latin America has had multiple economic and political crises over the years. There could be more.
However, the region also has an incredibly low e-commerce and digital payments penetration rate. And that must be great for leaders in both areas.