Philip
Founder & CEO of Intrinsiqq, Value & Growth Investor
Latin American equities' sell-off looks overdone as long as the underlying businesses keep growing and fundamentals remain intact. Under that condition, the drop is market noise, and MercadoLibre and Nu Holdings could offer attractive opportunities amid the panic. x.comÂ
Excellent management makes dLocal, MercadoLibre and Nu Holdings three great companies to pick up at a discount after the Lula-election selloff. Their Brazil exposure sent them down 9%, 9% and 22% on claims that the investment climate had worsened, a claim worth questioning. x.comÂ
South American political unpredictability keeps investors from rewarding MercadoLibre's excellent fundamentals. Today's selloff illustrates that risk, despite the strength of the business. x.com x.comÂ
MercadoLibre and Nu Holdings have massive runways and have thrived across political backdrops, so they do not need tax cuts or deregulation to keep winning. Both have performed extremely well in Brazil under Lula since 2023, even in a fragile macro backdrop. The election-driven selloff left these cream-of-the-crop businesses at lower multiples, and more near-term selloffs are possible. x.com x.com x.com x.comÂ
MercadoLibre's growth under Lula makes today's selloff look absurd. On a TTM basis since Q1 2023, revenue is up 206% and EPS 200%; having done so well during his term, it should be fine going forward. x.com x.comÂ
Crowded Brazil and EWZ longs are exposed after Lula's surprise election win, as reported by negligible_cap. MercadoLibre and many others are going to get absolutely nuked tomorrow. x.comÂ
Political fear after Lula election wins is a buying opportunity in Brazilian stocks, including EWZ, MercadoLibre and Nu Holdings. In USD, the table shows 12-month gains of 115% after 2002, 76% after 2006 and 18.5% after 2022, though shorter-term returns varied. x.comÂ
MercadoLibre's Brazilian marketplace lead continues to consolidate while delivery costs per order are falling. Its GMV share is 40.5%, against Shopee's 19.8% and Amazon's 11.7%; Amazon is slightly losing share. The numbers also back the company's comments on lower delivery costs. x.com x.com x.comÂ
Political uncertainty and Amazon competition have held MercadoLibre's stock back despite a humming business. The company is great and the stock deserves to turn, but at roughly 45 times earnings and only about 12% gained over five years, it has remained a difficult stock to own. x.com x.com x.com x.comÂ
MercadoLibre's business results should begin inflecting as credit portfolio growth slows now that the book has reached scale. An excellent outcome in Brazil improves the economic backdrop, and the stock sat at the technical bottom of its consolidation wedge. The economic backdrop, forward results and technicals all look very bullish. x.com x.comÂ