2 Stocks Down Over 30% to Buy Right Now and Hold for the Next Decade

There's no magic formula for building wealth in the stock market other than persistently buying and holding shares of growing companies. But when the market gives you the chance to buy competitively positioned businesses at discounts, it can set up attractive points to buy shares.

Shares of MercadoLibre (NASDAQ: MELI) and Axon Enterprise (NASDAQ: AXON) are both trading about 33% below their recent highs. These businesses still lead their respective markets of e-commerce and public safety technology.

Here's why patient investors should do well with these stocks over the next decade.

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MercadoLibre

MercadoLibre is the leading e-commerce and fintech platform in Latin America. Its three largest markets are Brazil, Argentina, and Mexico. Even after the stock's recent dip from its high, a $1,000 investment 10 years ago would still be worth $12,000 today.

E-commerce still accounts for only about 15% of total commerce in Latin America. That's why, after two decades of investing to expand in the region, the business is still growing revenue at a high rate, with the first quarter showing a robust 42% year-over-year increase.

Customers are attracted to MercadoLibre's wide selection and fast shipping. Unique active buyers increased 26% year over year in Q1, reaching 84 million. The company continues to invest in offering additional services and value to users, including reducing the free shipping threshold and rolling out credit cards for the underbanked. This drives more transaction activity and strengthens its market leadership.

MercadoLibre will have to continue investing to improve its services in an increasingly competitive e-commerce market. Bringing together credit and other financial services with e-commerce creates a synergistic ecosystem. This will be a key advantage to fend off competition from China-based e-commerce companies like Temu that are aggressively competing on price.

The stock trades at a high forward price-to-earnings (P/E) multiple of 44, but this is supported by expectations that earnings will grow at an annualized rate of 31% over the next several years.

Axon Enterprise

Law enforcement agencies are increasingly investing in cutting-edge technology to advance public safety. This is a huge opportunity for the market leader, Axon Enterprise. Despite the stock's recent sell-off, a $1,000 investment would have turned into $24,000 over the last 10 years, and the growth story is far from over.

Axon has been around for many years. The company made a name for itself as the maker of the TASER device, which continues to experience growing demand. The latest TASER 10 has seen twice the sales volume of the previous generation. But Axon is shifting to a software-first business model, which spells a more lucrative opportunity.

The company's Draft One platform uses artificial intelligence (AI) to make filling out police reports more efficient. Demand for AI tools more than doubled last year, generating more than $750 million in bookings.

As it evolves into a software-as-a-service model, it is creating a more durable competitive moat through tighter customer lock-in. The strategy is aimed at creating multiple products that work well together and at incentivizing agencies to commit to using Axon's hardware and services long term.

That said, this strategy shift has been costly in the near term. Axon has seen its margins fall over the past few years. This largely reflects higher costs due to tariffs and increased investment in building out its software platform. However, management is guiding for higher margins through 2028 as software revenue continues to grow.

Analysts currently model earnings to grow at an annualized rate of 29% over the next several years. The stock's forward P/E multiple appears high at 79, but Axon has historically commanded a premium multiple due to its leadership in public safety technology and the long runway for growth. Buying the dip has historically paid off for investors and should continue to do so.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Axon Enterprise and MercadoLibre. The Motley Fool has a disclosure policy.