2 Beaten-Down Stocks to Buy and Hold for the Next 10 Years

Even though major U.S. stock market indexes sit near all-time highs, it's possible to find beaten-down companies worth investing in. Consider Medtronic (NYSE:MDT) and MercadoLibre (NASDAQ:MELI), both leaders in their respective fields. These corporations have faced some challenges, but they remain excellent buy-and-hold options, despite lagging the market lately. Let me explain.

Image source: Getty Images.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

1. Medtronic

After spending most of the first half of the year moving south, Medtronic has been rebounding over the past three months. The company's financial results have something to do with that. Take the medical device specialist's first-quarter 2027 update for the period ended July 31. Medtronic’s revenue jumped 13.7% year over year -- a strong showing for the company -- to $9.8 billion. The healthcare leader's adjusted earnings per share (EPS) were $1.45, up 15.1% year over year. Medtronic also raised its revenue growth and EPS guidance for its full fiscal year 2027.

It was a beat-and-raise quarter for the company, which explains why its shares jumped after its earnings release. Still, Medtronic stock is down 2% year to date as of writing, while the S&P 500 has gained 12%. At current levels, the stock might be a steal, especially for investors focused on the long game. Medtronic is riding the wave of several growth drivers, will benefit from others in the medium term, and is also working to improve margins.

Right now, the company's cardiac ablation (a procedure that treats irregular heartbeats) solutions are doing much of the heavy lifting, thanks to innovative products it has launched in this niche in recent years. In the company's first quarter, cardiac ablation solutions revenue jumped 88% year over year.

Further, over the next few years, Medtronic should see its Hugo robotic-assisted surgery system gain traction and begin meaningfully contributing to its financial results, especially given the large addressable market in this field. And the company's planned separation of its diabetes care segment should help boost margins, since this unit has lower operating margins. Medtronic looks well-positioned to continue posting solid financial results while maintaining its dividend program.

The company has raised its payouts for 49 consecutive years, an impressive achievement that puts it close to joining the ranks of Dividend Kings, or corporations with at least 50 consecutive annual payout increases. Medtronic is an excellent buy-and-hold option for long-term income seekers.

2. MercadoLibre

MercadoLibre has faced increased competition in the e-commerce market in South America. The company has responded by making significant investments in the business that are currently harming profits and margins. For instance, MercadoLibre has expanded free shipping offerings (by lowering the threshold for eligible transactions) in some markets. The e-commerce specialist is also doubling down on its fintech ambitions.

MercadoLibre is expanding credit card offerings across various regions, an initiative that is reducing net income due to expected credit loss provisions. In the second quarter, MercadoLibre's revenue grew by almost 50% year over year to $10.2 billion. But the company's EPS dropped to $9.19, down from the $10.31 reported in the year-ago period.

Despite the challenges -- and the reduced bottom line -- MercadoLibre is a great stock to buy. Here are three reasons why. First, MercadoLibre's initiatives, including expanded free shipping, have worked wonders for other e-commerce specialists by boosting gross merchandise volume and revenue. MercadoLibre has also benefited from similar efforts in the past, and its most recent attempts are already positively impacting financial results.

Second, the e-commerce leader's efforts should expand its ecosystem and competitive moat. MercadoLibre benefits from network effects and high switching costs. A larger pool of customers and merchants, combined with broader fintech offerings, can strengthen the company's moat. Third, there is a vast runway for growth in the markets where MercadoLibre operates. The company points out, for instance, that a substantial percentage of people in some of the regions where it does business are underbanked.

MercadoLibre will also benefit from the continued growth of the e-commerce market. The stock is down 18% over the past year, but the company's future seems bright. Investors should consider initiating a position before the stock bounces back.

Prosper Junior Bakiny has positions in MercadoLibre. The Motley Fool has positions in and recommends Medtronic and MercadoLibre. The Motley Fool has a disclosure policy.