Some investors probably lump all online shopping stocks together, thinking they are a waste of time and destined to be perpetual losers because of the bloated losses, quarter after quarter, of Amazon.com, Inc. (Nasdaq: AMZN).

Billionaire Jeff Bezos, Amazon’s visionary founder, perhaps went off the tracks pursuing launches of everything from smart phones to drones, while forgetting the e-commerce sales model that started it all. Or maybe he has a grand plan that most of us have yet to realize.

#-ad_banner-#Either way, it would be unwise to think other online shopping companies have no choice but to follow suit and expand to other businesses in order to make a buck.
Three following three companies are doing are churning out solid, growing profits, offer a seemingly endless variety of goods and have a clearly defined direction — unlike Amazon.

One is headquartered in the United States, one is Asian and the other is Latin American. The latter two have a particular appeal because emerging markets show strong potential for online shopping plays because of their less developed brick-and-mortar economies.

Overstock.com, Inc. (Nasdaq: OSTK)

Overstock.com, with a modest but growing $578 million market cap, is an online discount retailer headquartered near Salt Lake City, Utah.

The company initially specialized in surplus and returned merchandise, but has since branched out to include new merchandise, goods from domestic small businesses and other niche categories. Overstock also manages inventory for other retailers and is boosting its security technology to capture more of that third-party business.

But the company remembers its profitable roots. Last month, Overstock bought the jewelry assets of Bidz in a liquidation purchase. Interestingly, Overstock accepts Bitcoin and, in the future, hopes to enter financial services as a discount broker.

Overstock’s 239% growth rate on a trailing 12-month basis puts it in the enviable 94^th percentile of internet retailers. Its trailing price-to-earnings ratio of only 7.29 bests the industry’s 114.27 average and shows Overstock is certainly not overvalued — while the industry probably is (perhaps thanks to Amazon’s outsized influence).

Overstock’s had the sheer audacity to declare on Nov. 4 a “price war” against Amazon in the books category, and said that the books across its site were less expensive that Amazon’s.

Alibaba Group Holding Ltd. (NYSE: BABA)
Alibaba, with an outsized market cap of $285 billion, is the new behemoth on the block. The online shopping bazaar has been around for years, but only began trading on the New York Stock Exchange in September. So its historic track record is still a bit opaque by Western accounting standards.

Alibaba is posting trailing 12-month revenue growth of 49% — a remarkable number given the company’s size and scale. Alibaba operates as an online and mobile commerce company in China — an incomparable market opportunity given its population of 1.3 billion — and is expanding internationally. Currently, Alibaba conducts nearly four out of every five online transactions in China.

The flagship Alibaba.com site is an online business-to-business marketplace that focuses on global trade among businesses, but is also available to the individual consumer. The company operates ad networks, cloud computing services, Web hosting, and payment and escrow.

Seeking Alpha recently noted Alibaba now has a higher market cap than Wal-Mart and pondered whether that is reasonable. Given Alibaba’s growth rate versus Wal-Mart’s stagnation, the greater valuation is likely appropriate. S&P Capital IQ estimates Alibaba has a one-year earnings per share growth rate of 173.2% and an overall profit margin of 44.4%.

MercadoLibre, Inc. (Nasdaq: MELI)

MercadoLibre hosts online commerce platforms in Latin America. Its automated platform lets businesses or consumers list items and conduct sales in either a fixed price or auction format, giving the company the versatility of both a shopping site like Amazon and an auction business like eBay.

In fact, eBay liked MercadoLibre so much that it became an investor, and owns an estimated 18.5% of the company. MercadoLibre has no meaningful competitor in Latin America. The company established itself early on in 1999, and no local competitor has emerged since.

MercadoLibre, a mid-cap with a $6 billion valuation, also offers online classifieds for items ranging from motor vehicles to real estate, combining attributes of both Craig’s List and Zillow, an online real estate service. Customers can set up their own online shops in countries from Mexico to Chile.

MercadoLibre’s stock rose about 18% at the end of October after the company reported Q3 earnings that handily topped estimates. The company’s Q3 revenue increased 20% year over year. This is especially encouraging because the growth was measured in U.S. dollars – meaning growth was robust even after the local currency was converted into a strong dollar.

A few other good reasons to like MercadoLibre is how it is performing against its e-commerce peers. It has a five-year earnings per share growth rate of 24% versus the industry’s 20%. Net margins stand at 15%, versus the industry’s 2%, and the company boasts a 38% return on equity, compared to the industry’s 15%.

Stock analysts tend to like these three stocks. Analysts surveyed on First Call have a consensus buy rating on Overstock.com and Alibaba and a neutral rating on MercadoLibre, presumably based on its recent surge in price.

Risks To Consider: These are three high-growth stocks with escalating profits. A quarterly results stumble at some point by any of them would likely create a meaningful downdraft in their share prices, at least on a short-term basis.

Action To Take –> Continued global growth of online shopping seems inevitable and very likely to be robust. A basket approach could deliver good results with these — perhaps $6,000 divided equally between the three. If one should stumble, the other two would likely still deliver strong results to make up for it.

One particularly special thing about MercadoLibre and Alibaba is the moat around their business. A wide moat implies control of a large share of the market and the difficulty for other firms to compete. This is one key trait of a “Forever Stock,” or a company so powerful that you can buy it now and virtually own it forever. StreetAuthority is excited to share the other two qualities of Forever Stocks with you via a taping of our latest live presentation at St. Edward’s University. To begin watching, click here.