Where I’d Invest a $10,000 Windfall Right Now

Creating a diversified portfolio of quality growth and dividend stocks can help Canadian investors turn a $10,000 investment into $100K.

Aditya Raghunath ❯

Aditya Raghunath joined the Motley Fool Canada team in 2019 and has close to seven years of experience in covering publicly-listed companies. With a post-graduate degree in finance, Aditya aims to educate and engage Canadians by writing extensively about growth, dividend, and value stocks. If you are considering investing in the stock market, he recommends reading The Intelligent Investor by Benjamin Graham before taking the plunge.

Published May 12, 2023 6:15 pm EDT

With enough time, luck, and patience, it’s possible to turn a $10,000 investment into $100,000 over the long term. To achieve this goal, it’s essential to have an investment horizon spanning several years. Moreover, your equity portfolio should consist of companies that are equipped with strong fundamentals, an expanding addressable market, and a solid management team.

Moreover, you need to brace for prolonged periods of stock market volatility, multiple bear markets, and a steep pullback in share prices in order to benefit from the power of compounding.

With these factors in mind, here’s how I’d invest a $10,000 windfall right now.

A compelling growth stock

A Latin America-based e-commerce company, MercadoLibre (NASDAQ:MELI) is valued at a market cap of US$65 billion. In the first quarter (Q1) of 2023, MercadoLibre increased sales by 35% to US$3 billion, while adjusted earnings more than tripled to US$3.97 per share.

This high-growth company offers you exposure to one of the fastest-growing regions globally. Moreover, with rising internet penetration rates in Latin America, MercadoLibre should benefit from the strong adoption of digital payments and online shopping in the upcoming decade.

Often called the Amazon of Latin America, MercadoLibre already operates the largest e-commerce and digital payments platform in this region. In fact, it accounted for 21% of e-commerce sales in Latin America last year and continues to gain market share.

Due to a robust network effect, MercadoLibre is successfully widening its ecosystem and is well poised to deliver outsized returns to shareholders. Right now, e-commerce accounts for just 11% of retail sales in Latin America. This number is forecast to touch 20% in the next three years.

Priced at 75 times forward earnings, MELI stock trades at a premium. But its adjusted earnings are forecast to expand by 48% annually in the next five years.

A mining stock

Portfolio diversification is key to lowering overall risk and building wealth. You can diversify your equity portfolio by buying shares of mining companies such as Largo (TSX:LGO). Valued at a market cap of $450 million, Largo develops and sells vanadium-based energy storage systems in Canada.

The TSX company has increased sales from $107 million in 2019 to $229 million in 2022. This healthy top-line growth is forecast to continue as analysts expect Largo to increase sales to $305 million in 2023 and $400 million in 2024.

While still unprofitable, Largo’s adjusted earnings are forecast to improve to $0.8 per share in 2024 from a loss of $0.09 per share in 2023. Priced at 7.4 times forward earnings, Largo stock is trading at a discount of 106% to consensus price target estimates.

A dividend-growth stock

The final stock on my list is goeasy (TSX:GSY), a company that operates in the financial lending space. Despite a sluggish lending environment, goeasy continues to report an uptick in sales and earnings.

For instance, analysts expect revenue to increase by 20.8% to $1.23 billion and earnings by 22.7% to $14.17 per share in 2023. So, priced at 7.6 times forward earnings, the TSX stock is trading at a bargain.

Moreover, it also offers shareholders a tasty dividend yield of 4%, and these payouts have risen by 18% annually in the last 16 years. GSY stock has already delivered market-thumping returns, as it has gained an emphatic 1,300% since May 2013.