I can tell you I’m very happy right now because I had the chance to buy more of two of my favourite holdings. Both are e-commerce giants. Both operate mainly in emerging markets. And both sold off aggressively after their respective earnings reports.
Let’s start with MercadoLibre. The “Amazon of Latin America.” And that nickname isn’t even an exaggeration.
The company holds roughly 28% market share of Latin America’s online retail market, mainly driven by Brazil, Argentina and Mexico. But what makes MercadoLibre even more dominant is that management understood early on that fintech integration is key. Now Mercado Pago, its fintech arm, processes over $90 billion in total payment volume quarterly. That’s how you build an ecosystem.
People always talk about Nu when it comes to LatAm or Brazil fintech, but Mercado Pago is closing that gap rapidly, especially with its credit lending business expanding aggressively. And again, what makes this so powerful is the integration into the core platform. Commerce and payments feeding into each other, forming an almost indestructible ecosystem.
Beyond that, Latin America itself is an incredibly interesting region that I’m highly bullish on. As I’ve outlined before, the region benefits from a combination of long-term secular trends: decreasing corruption making markets more investable, rising smartphone adoption, improving healthcare, and overall quality of life improvements.
These dynamics are also why investors like Stanley Druckenmiller have been very bullish on countries like Brazil.
So what has MercadoLibre’s stock done over the last five years?
Pretty much nothing. Up around 10%.
Admittedly, the stock was quite richly valued back then. But that valuation has now compressed into what I would call a joke of a risk/reward.
While the stock went sideways, revenue quadrupled and free cash flow increased roughly 20x since 2021. That leaves us today with a forward free cash flow yield of around 11%, and roughly 14% based on FY27 estimates, alongside a forward P/E of about 17x based on FY28 EPS.
And the interesting part is: management isn’t even optimising for peak profitability right now. These massive jumps in cash flow are essentially a by-product of a very clear strategy: aggressive top-line expansion through continued market penetration.
I’m extremely bullish on this stock and have already doubled down twice this week, making it my sixth-largest position in the portfolio.
Tomorrow I’ll talk about the second e-commerce name that looks just as interesting right now.
