If you continually add money over a long period of time, you can retire as a millionaire.
There are different approaches to investing and different goals. Some investors are looking for passive income, while others are saving for a rainy day. Many people want to retire with at least $1 million in their portfolio to enjoy a comfortable retirement.
The $1 million goal is achievable if you start early enough, continually add money, and maintain it over the years. It also helps you choose quality stocks. MercadoLibre (MELI -0.58%) and Lemonade (LMND 1.10%) are two great candidates.
1. MercadoLibre: the king of e-commerce in Latin America
MercadoLibre is one of the hottest tech stocks. The company has commanding positions in two exceptional growth industries and continues to improve.
The company’s main business is electronic commerce. The company provides 18 countries in Latin America with a powerful e-commerce platform that rivals Amazon in the region. MercadoLibre has a strong logistics business that delivers products to buyers quickly and efficiently, and recently launched a membership program called Meli+.
One of the ways MercadoLibre continues to improve its services is by bringing more suppliers into its network, but it also does much more than that. This reduces costs by allowing members to choose the days of the week they receive all their purchases.
It also just opened its first fulfillment center in Texas to serve the Mexican market. This is something to keep an eye on as it could lead to further US penetration. Taking a cue from Amazon’s strategy, the company is offering more brand names and now also has gift lists and customized coupons.
Total volume in the second quarter increased by 20% (83% on a currency-neutral basis) compared to the same period last year. The company is expected to continue its strong growth in the future as it continues to provide higher value services.
But MercadoLibre is much more than e-commerce these days. The company operates a fast-growing fintech division that offers digital payments and many other financial services, all on its apps. Monthly active users increased 37% year-over-year in the second quarter, and total payments increased 36% (86% on a currency-neutral basis).
Financially, the company is very profitable and the company as a whole has good profits. Assets under management rose 86% to $6.6 billion in the quarter, and net interest margin (after losses) was 31.1%. Total net income for the second quarter more than doubled compared to the same period last year, with a profit margin of 10.5%.
Although the e-commerce market has not yet penetrated Latin America, MercadoLibre has two main businesses that have great potential.
2. Lemonade: A disruptive insurance model
Lemonade is an artificial intelligence (AI)-powered insurance company that is changing the way people buy insurance. So far, they’ve been very successful, at least in terms of getting customers to choose their products and increasing sales. Premiums in force increased 22% year-over-year in the second quarter, and revenue increased 17%.
With the explosion of AI capabilities, it’s no surprise that new insurance companies will enter the industry with better products.
What could be a better product? Lemonade is almost entirely digital, using chatbots to add customers and pay their bills. Use data analytics and machine learning to quickly and accurately price insurance and pay claims. It’s quick and simple, with approvals often occurring within seconds and requiring little human intervention.
So why don’t older companies do this? Yes, to some extent. But they are huge companies with layers of built-in infrastructure. It’s not so easy to do a complete overhaul.
Lemonade, on the other hand, is built on a digital board, and AI is part of everything it does. It’s agile, modern, and clicking a chatbot to get insurance prices or make a claim feels much more user-friendly than calling an agent.
Lemonade hasn’t had much success so far, making a profit, but it’s improving. Notably, the company reported a significant decline in its loss ratio in the second quarter. This is a positive direction for the loss ratio, which measures the amount that insurance companies pay out in claims.
The loss ratio is higher than shareholders would like, but the improvement is not linear, but it is moving in the right direction.
The company is still reporting severe net losses. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) improved 18% in the quarter, but the company remained in the red, and its net loss narrowed 15% to $57 million. Still, it’s a huge loss.
Lemonade has disappointed investors who feel it will take too long to prove that its profits truly improve traditional insurance companies. But it’s getting there.
Lemonade stock is not for risk-averse investors. Still down a massive 91% from all-time highs, the market has really lost its flavor. However, the market is fickle and can change slightly (likely to result in millions of yen in net income).
As soon as Lemonade starts showing better value, it should start rising again. True, it will take a long time. But over the long term, this stock can be a huge asset to a growth portfolio. And at this low price, risk-tolerant investors may want to take a small position.
