3 Stocks to Buy: MercadoLibre, Amazon, Costco

With integrated operations spanning e-commerce, the Mercado Pago fintech platform, and Mercado Envíos logistics across nearly two dozen countries, MercadoLibre maintains a dominant regional footprint.

The company's business model integrates an e-commerce marketplace, the fintech platform Mercado Pago, and the logistics arm Mercado Envíos, creating a flywheel effect where each segment's activity propels the others.

This integrated approach targets a market where e-commerce penetration is currently about half that of more developed regions like the US, UK, or China, indicating substantial room for growth.

The company's total payment volume surged by 56% year-over-year, while gross merchandise volume increased by 44% year-over-year to $22 billion. MercadoLibre also posted a net income of $466 million for the second quarter.

MercadoLibre's credit business is actively expanding, with a focus on lengthening loan durations in Brazil and scaling credit card issuance in Mexico and Argentina.

Management has indicated that margins should improve without hindering revenue growth, even as the company prioritizes growth over immediate profitability, which has led to some margin compression. Risks include macroeconomic and political volatility across various Latin American currencies and economies.

Amazon is positioned for sustained growth, with its business model designed to thrive regardless of AI integration, according to an analyst.

In Q2 2026, the company's revenue hit $200 billion, marking a 20% year-over-year increase, while Amazon Web Services (AWS) revenue reached $42 billion, up 37% year-over-year.

AWS accounts for 60% of Amazon's total operating income, despite making up only 21% of sales, and continued backlog growth is anticipated as more companies adopt AI solutions.

Amazon has increased pricing for both new and older GPUs, transforming compute ownership into a significant cash flow driver, especially with the current AI wave.

Despite high capital expenditure due to aggressive investments in new AI data centers, management reported a substantial $496 billion AWS backlog for future years.

The company is also developing its own CPUs, networking solutions, and AI chips, with the custom chip business alone projected to reach a $25 billion annual run rate, indicating substantial latent value.

By charging annual membership fees for warehouse access and maintaining limited SKU selections with thin markups, Costco functions as a high-quality anchor stock for long-term investors, Rachel noted.

The core of its operations involves charging customers an annual membership fee to access its warehouses, where a highly specific selection of products is sold with notoriously thin markups, further supported by strong in-house brand development.

Costco's retail sales are intentionally designed to operate at a break-even point, according to Rachel.

The vast majority of Costco's profits are derived from its membership fees, establishing a recurring and predictable income stream that prioritizes customer loyalty and renewals over maximizing profit margins on individual items.

Costco's warehouses maintain a narrow product selection, carrying approximately 3,500 to 4,000 SKUs, in contrast to the tens of thousands offered by typical grocery stores or big box retailers.

This concentrated inventory strategy enables Costco to commit to enormous volume purchases of individual products, granting it significant leverage to negotiate lower prices directly with manufacturers and eliminate middle-layer distributors. Its Kirkland Signature private label brand also accounts for a substantial portion of total sales.

Costco currently operates nearly 1,000 warehouses worldwide and boasts over 84 million paid members, primarily concentrated in the US and Canada, where it reports a robust renewal rate exceeding 92%.

For fiscal 2026 Q4, the company recorded net sales over $93 billion, an 11% year-over-year increase, and achieved approximately $3 billion in net income with a 9% growth in comparable sales.

Costco's business reach extends beyond traditional groceries to include pharmacy, automotive, and a travel business, with cruise bookings recently growing by 16%.

The company also sees significant growth opportunities outside North America and has a history of distributing special dividends to shareholders.

Costco stock typically trades at a premium valuation, reflecting the market's pricing of its inherent stability and consistent growth, making it rarely appear cheap from a valuation perspective.

Despite its premium, Costco is recommended as a core holding for long-term buy-and-hold investors who prioritize stability and predictable performance in their portfolios.