Billionaire Stan Druckenmiller -- of Soros Fund and Duquesne fame -- was one of the first investors to catch on to Nvidia (NVDA +0.29%) as an artificial intelligence (AI) investment. He bought Nvidia stock in the fourth quarter of 2022, when it was around $15 a share. Since then, it has gone up hundreds of percentage points, completed a 10-for-1 stock split in 2024, and now trades at around $115.
However, Druckenmiller has now fully sold out of his position. In the Duquesne Family Office, the investor didn't own a single Nvidia share at the end of 2024.
What is he buying instead? Two e-commerce giants that could be great long-term investments: Amazon (AMZN +0.63%) and MercadoLibre (MELI +3.35%). Here's why the legendary investor might be buying these two stocks right now, and whether you should consider adding them to your own portfolio.
NASDAQ: AMZN
Key Data Points
Rotating into Amazon
At the end of Q4 2024, Amazon made up around 2% of Druckenmiller's U.S.-listed investments. The e-commerce and cloud computing company is another beneficiary of the AI boom, but looks to be trading at a cheaper valuation than Nvidia. Its Amazon Web Services (AWS) division is seeing rapid growth because of AI, with revenue up 19% year over year to $28.8 billion in the fourth quarter. This division is highly profitable too, posting a 37% operating margin over the last 12 months.
But that may not be the only reason Druckenmiller is buying Amazon. Its flagship e-commerce division is going through its own profit inflection, with North America operating margin hitting 6.4% over the last 12 months, compared to close to zero a few years ago. With heavy growth in advertising services, subscriptions such as Amazon Prime, and third-party seller services, Amazon's retail division has plenty of room to continue expanding its profit margins in 2025 and beyond.
As of this writing, Amazon stock trades at a price-to-earnings ratio (P/E) of 35, its lowest level in the last five years. Consolidated operating margin hit a record 11% in 2024 and should keep expanding in 2025. Revenue grew 11% on a consolidated basis in 2024 compared to 2023.
This suggests that Amazon could see a massive earnings inflection over the next few years, which will bring down its P/E quite quickly. This makes Amazon stock cheap today and is a good reason for Druckenmiller to buy the stock. It looks like it could be a smart move to buy and hold Amazon stock right now and hold for the long haul.
AMZN PE Ratio data by YCharts
Betting on e-commerce in Latin America
A larger position than Amazon for Druckenmiller is its e-commerce platform brethren MercadoLibre, at 2.45% of the Duquesne portfolio. The platform focused on Latin America beat out Amazon in some key markets such as Mexico, which shows the impressive chops and local understanding this management team has.
MercadoLibre is growing much faster than Amazon, with its commerce division posting 44% growth in Q4 2024. Revenue in U.S. dollar terms can be choppy because of foreign currency movements, but overall, MercadoLibre saw rapid growth in the last 10 years, with revenue up 3,430% over that time period.
The company does not have a cloud computing division, but it does have a second act with its financial technology (fintech) division. Driven by its MercadoPago mobile application, MercadoLibre acts as a payment processor, bank, and Venmo-like mobile money transfer service for millions of customers. Fintech revenue grew 29% year over year in the fourth quarter and has 61.2 million monthly active users, growing 34% from a year ago.
NASDAQ: MELI
Key Data Points
This ecosystem of fintech and e-commerce solutions is why MercadoLibre has found so much success in Latin America. This market has a much larger underbanked population than the United States, where citizens did not have banking relationships before smartphones (it was all cash). Building MercadoPago was not only a nice business in and of itself, but built the path for shoppers in Latin America to move from in-person cash transactions to online shopping on the MercadoLibre marketplace.
Generating just $21 billion in total revenue versus $638 billion at Amazon, there is plenty of room for MercadoLibre to grow in the years to come as it aims to serve the 650 million-plus people of Latin America. E-commerce has a much lower penetration than North America in many of these countries, which gives MercadoLibre a larger growth trajectory over the next decade than Amazon.
Today, the stock has an expensive-looking P/E of 53, which might dissuade some value investors from buying. However, smart investors like Druckenmiller know that an earnings ratio is not everything when it comes to valuation, and a durable grower such as MercadoLibre can bring down its P/E quickly when you focus on the long term. I think investors who buy MercadoLibre stock today will get solid returns if they hold for the next decade.
