Investor optimism has risen amid a return of the bull market. However, the benefits are far from even, and while the "Magnificent Seven" and a few other stocks have achieved record highs, many others have underperformed the indexes.
Moreover, not all the top performers have received a lot of attention. To that end, investors may want to look at two stocks from Latin America in striking distance of all-time highs.
1. MercadoLibre
MercadoLibre (MELI 3.09%) has seemed unstoppable. Instead of being held back by challenging regional issues, the company seems to thrive because of them.
In e-commerce, MercadoLibre continues to widen its product assortment and make technical improvements to its app. The company also drives revenue by offering ads on its widely viewed web platforms, which serve as an additional source of revenue. In 2023, almost 50,000 new advertisers came to its platform.
Furthermore, penetration on the logistics front has risen to nearly 50%, giving the company an edge over competitors such as Amazon and Sea Limited.
Mercado Pago, a fintech business initially created to increase e-commerce sales, has long blossomed as a stand-alone business. It continues to add SMBs (small- and medium-sized businesses) and product functionality to improve the user experience. In the fourth quarter of 2023, it surpassed 50 million active users for the first time in its history.
Given these improvements, it should not surprise investors that MercadoLibre earned over $14 billion in revenue in 2023, a 38% yearly increase. That led to a 105% rise in net income over the same period, growing to $987 million.
Admittedly, its P/E ratio of 78 may seem elevated. However, that places its earnings multiple just slightly ahead of Amazon's. With the stock having pulled back, now looks like an excellent time to buy as it improves its competitive advantages.
2. Nu Holdings
Nu Holdings (NU 1.66%) is the parent company of one of the world's largest digital banks and has the backing of Warren Buffett's Berkshire Hathaway. Given its growth, one can see why Buffett's team took an early interest. Nu claims almost 94 million customers. It has benefited from rapid growth, with more than 19 million customers coming to the platform in 2023.
Moreover, it achieved this feat mostly through its success in Brazil, where 53% of the country's adults have at least one account on the platform. With Brazil approaching a saturation point, it has sought to repeat that success in Mexico and Colombia.
To understand Nu's success, investors need to understand that a few banks had dominated the industry in Latin America. Consequently, large percentages of the population were left out of the banking system. Nu has sought to bring more of these customers into the system, and nearly 6 million Brazilians received their first credit card over the one-year period of July 2021 to July 2022 as a result.
The approach has also translated into rapid growth. In 2023, revenue was just over $8 billion, 68% higher than year-ago levels. This occurred while operating expenses fell, resulting in a net income of $1 billion, an improvement from the $365 million loss in 2022.
Even as the stock trades near 52-week highs, few investors may appreciate its value proposition. The stock currently sells for 27 times forward earnings, a multiple that could significantly increase once more investors gain an understanding of this Warren Buffett investment.
