A properly diversified portfolio has a mix of about 25 to 30 stocks of all different stripes, carefully chosen to maximize growth while minimizing risk. Each individual portfolio will look different based on the investor's age, risk level, and other factors. Growth investors will lean toward having more growth stocks, but anyone who owns growth stocks should have a group.
All it takes is for one of them to really take off to push your investment into the stratosphere, even if the others are mediocre or even underperform. You can only lose the amount you put in, but you could double or triple your investment, or make much, much more from one amazing stock.
If you're looking for a terrific growth stock to invest in today that could set you up for life -- or at least help you get there -- consider MercadoLibre (MELI +1.36%).
The Amazon of Latin America
MercadoLibre is an Amazon-like business servicing 18 Latin American countries. It also started out as an e-commerce company, and it developed a fintech business to provide alternative payment options for its customers. Many of the populations it serves are underbanked, and it offers digital payment options that have now turned into a huge and expanding financial services operation.
Like Amazon, it hasn't stopped there. It has a growing ad business, asset management, physical store payments, and more, and it keeps adding more services. It has a first-mover's edge in many of its businesses, and it continues to upgrade its platforms to stay ahead of new competition.
NASDAQ: MELI
Key Data Points
The current snapshot
MercadoLibre is reliable for outstanding performance, and it delivered in the 2024 fourth quarter. Currency neutral, revenue increased 96% year over year, with a 56% increase in gross merchandise volume and 49% increase in total payment volume. The credit portfolio rose 74%, and adjusted free cash flow was up 111%. Net income was $649 million, up from $165 million the prior year.
There were some standout numbers. Unique buyers grew 24% year over year to 67.3 million, surpassing 100 million for the full year for the first time. Consider that that's less than half the number of Amazon Prime customers to get a sense of how much more market share MercadoLibre can capture. Adding to that, items sold per buyer increased 3%, and that's inclusive of the new customers.
One factor working against MercadoLibre is economic volatility and high inflation, which is why it reports currency-neutral results in addition to generally accepted accounting principles (GAAP) results.
Into the future
MercadoLibre is almost as old as Amazon, but it's taking longer to catch on in its region. E-commerce has only 14.4% penetration in its markets, lagging the U.S. by about 10 years, and MercadoLibre is benefiting from, as well as generating, a steady shift online.
Image source: MercadoLibre.
Third-party estimates are that the market opportunity will increase by 54% from $151 billion in 2023 to $232 billion by 2028. With a forecast of 17.4% e-commerce penetration, that still leaves a huge opportunity ahead at that time. And that's just e-commerce. MercadoLibre is also the premier retail advertising platform in its region, and this market is expected to triple by 2028, reaching $5 billion, also still lagging the U.S.
There's even more opportunity in fintech, and room to expand in each country. Less than half of the population in Mexico has a bank account, and less than a fifth has a credit card. In Brazil, 59% of the credit is controlled by four large, traditional banks, with many funds in low-yielding accounts. MercadoLibre is the top fintech company by monthly average users in Mexico, Argentina, and Chile, and it has the No. 2 spot in Brazil, the most populous country in the region. It's well-positioned to disrupt the status quo.
Been there, done that
MercadoLibre isn't a young stock, and it's already done well for its shareholders. If you'd invested $10,000 in the company 10 years ago, you'd have more than $160,000 today.
At current growth rates, MercadoLibre should keep flying, and it doesn't look like it's slowing down anytime soon. To give one scenario, if it can keep a compound annual growth rate of 30% currency neutral over the next 10 years, revenue will increase from $21.7 billion today to nearly $300 billion. You can see how the stock will follow.
MercadoLibre has tons of future opportunity, and it's an excellent stock pick for the growth investor today.
