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my $ref = \"stuff";

$$ref =~ s/u/i/;
## or even 
$$ref .= " and more stuff";

sub modify_string{
  my $arg = \shift;
...
  $$arg =~ s/u/i/;
  return $$arg;
}

my $string = "stuff";
modify_string( $string );

## or even
my $copy = modify_string( $string );

my $new_string = modify_string ( "literal stuff" );