MercadoLibre's collapsing margins and earnings make its 45-times-earnings valuation look like a value trap. It faces intense competition, and less of its revenue reaches the bottom line; falling earnings make the stock more expensive even as its price falls. Nu Holdings trades at 17 times earnings and Inter & Co at 7 times, with both growing revenue and earnings robustly. Selling MercadoLibre to build positions in companies with better fundamentals is under consideration. x.com  x.com  x.com  x.com 

Nu's 33% ROE is not proven until it survives a full credit cycle, because a bank's underwriting is only tested when borrowers stop paying. Per @sytaylor, Q2 revenue rose 39% to $5.9bn and net income topped $1bn. The open question is what happens to that ROE when unemployment rises, payments are missed, credit losses climb and money gets more expensive. Brazil's slowing economy and rising NPLs are not the same as a full cycle; until then the reported ROE is somewhat fake. x.com  x.com  x.com 

The market is not bullish enough on Brazilian digital banks Nu and Inter & Co, which grow fast despite high rates and could do far better if rates fall. Nu grows 40% a year and Inter 25% with Brazil's Selic at 13.75%, near its highest since 2020, yet they trade at 12x and 8x 2027 earnings, and Inter at 1.5x tangible book even after a 20% jump. Nu already earns a 30% ROE and Inter 16% and climbing; a return toward the 7.25% 30-year average rate would lift both growth and returns. x.com 

Nu Holdings' loan book is performing even though Brazil's credit cycle is bad; the damage shows up at peers instead. @ThainRos notes the weak cycle is partly why Nu trades at 14x next-twelve-month earnings despite earnings growing around 40%. x.com 

Nu Holdings still has a massive runway as Nubank expands deeper across Latin America, having already built one of the region's largest digital banking platforms. x.com 

Inter & Co looks very cheap at 1.2x book and 5.5x 2027 earnings, with a 16% ROE and growth of about 20-25% a year. The multiple is depressed because it is a small-cap Brazilian bank with hit-or-miss English-language investor relations and some Brazilian consumer stress heading into a presidential election. Compared with Nu, it carries more execution and single-market risk but a lot more upside if it works and gets re-rated. x.com  x.com  x.com  x.com 

Nu Holdings' upcoming earnings look unlikely to be well received if the market does not reward Inter & Co's results, since the two have historically traded similarly around earnings. Both operate in the same credit cycle, but Nu has a much lower share of secured lending, putting it at a credit-risk disadvantage, though it is more diversified across countries. x.com 

Inter & Co is hard to justify owning when Nu Holdings exists. Nu has better metrics across the board and just as much, if not more, future growth opportunity. Inter also doesn't disclose enough, leaving its cheaper valuation as the only reason to buy it. x.com 

Inter & Co could easily double if Bolsonaro delivers lower interest rates. It trades at just 1.4x 2027 book value, assuming 15% book growth, and targets 30% ROE by 2029, having already lifted ROE from 5% in 2023 to 16%. x.com 

Nubank keeps proving it is not just adding customers but making more money from each one, which is what long-term compounding looks like. Revenue rose 39% year over year to $5.9B, and quarterly net income topped $1B for the first time. x.com