If you're happy with average market returns (and it's perfectly fine if you are), then owning a simple S&P 500 index fund will be all you need. If you're hoping to beat the market, though, that's going to require more. Specifically, for most people, it will mean picking individual stocks capable of outperforming the average ticker, which is no easy task.
Still, it can be done if you can take a step back and take a thorough, realistic look at the entire market landscape.
To this end, investors on the hunt for a stock or two that just might beat the market might want to consider taking a stake in MercadoLibre (MELI -0.09%).
Here's why you should look at this Latin American e-commerce giant before it moves deeper into record-high territory.
What's MercadoLibre?
Never heard of it? That's OK. Plenty of people haven't. That's largely because it only does business in South America.
But what a business it does!
MercadoLibre is first and foremost an e-commerce outfit, although the categorization doesn't quite do it justice. It firmly leads its competitors within the region's biggest and best markets like Brazil, Mexico, and Argentina, where it's focused on winning a share of the highly fragmented market. It's such a clear leader, in fact, that it's often referred to as the "Amazon (AMZN 0.18%) of Latin America."
The description still doesn't quite explain all that MercadoLibre is, though. The company is also a major payment middleman akin to PayPal, a logistics service provider, and increasingly, an advertising platform.
All told, MercadoLibre did $20.8 billion worth of total business last fiscal year, turning a little over $2.6 billion of that into net operating income, up 37% and 19%, respectively. Analysts expect it to do similarly well this year, and next year too, despite the economic lethargy expected for most of the region.
Data source: StockAnalysis.com. Chart by author.
Surprising strength given the region's broad economic weakness? The disparity makes much more sense once you dig deeper into where Latin and South America currently stand in terms of how technology is changing the continent's sociocultural situation.
The whole continent is now coming out of the turn
Getting straight to the point, Latin America is where North America was in the late 1990s and early 2000s.
Think about that time period. The internet was still relatively new, and high-speed broadband connections were quickly becoming the preferred means of connecting to it. Although true smartphones weren't yet common, significant ownership of mobile phones at the time at least set the stage for smartphones' eventual rapid adoption.
Of course, this double-barreled technological revolution gave rise to online shopping and digital payments that made Amazon the smashing success it has become.
Image source: Getty Images.
There are some differences between North America then and South America now, to be sure. Namely, South America is considered a "mobile first" market, meaning smartphones are many consumers' primary -- and sometimes only -- internet connection. Indeed, digital marketing company Siprocal reports that more than 270 million of Latin America's residents (about 58% of the population) are mobile-first consumers, making their phone the centerpiece of a digital ecosystem that extends to television and even out-of-home media.
The ultimate outcome is still the same, though. That is, as connectivity technology spreads, online shopping follows.
That's why Americas Market Intelligence PCMI believes the region's e-commerce industry is set to expand to the tune of 21% this year, with similar growth in the cards at least through 2027, largely driven by ongoing smartphone adoption. For perspective, GSMA expects Latin America's smartphone penetration rate to swell from 2023's figure of 80% of all mobile phone users to 92% by 2030. It may not even take until 2030 to reach that mark, however. Technology market research outfit Canalys reports that a record-breaking 137 million smartphones were shipped to Latin America last year alone.
Just know that whenever it happens -- much like their U.S. counterparts -- each of these users is apt to increasingly utilize their web-connected devices the longer they own one.
MercadoLibre is positioned to capture more than its fair share of this growth by having a hand in nearly all facets of the expansion.
Just don't wait too long (if you're planning on waiting at all)
Plenty of U.S. investors seem to see it coming too, if this U.S.-listed stock's 300% run-up from 2022's bear market low to its recently reached new record high is any indication. That's a move that could be downright intimidating to would-be newcomers, in fact.
Don't be too discouraged or dissuaded, though.
This company's situation is very similar to Amazon's a couple of decades back. Then, every time it looked and felt like Amazon couldn't possibly continue to grow as it had in the past, it found a way to do so, working its way toward better profitability the whole (although MercadoLibre is already reliably profitable, for the record) as the stock climbed investors' wall of worry. In retrospect, we can look back and see that Amazon's persistent success was rooted in a sociocultural and technological revolution that mere economic headwinds wouldn't stop.
That's a particularly important point for MercadoLibre right now, considering the backdrop of potential economic weakness prompted by a tariff war that may or may not actually be over. Even though Brazil, Argentina, and most of South America will only be subject to the United States' affordable 10% baseline import tariff, there's certainly a regional ripple effect from the steeper tariffs that Mexico and Venezuela could end up facing.
Don't underestimate capitalism's ability to find ways of growing sales and profits, though, assuming tariff and trade deals aren't worked out well enough to stave off an economic impact in the meantime. Remember, Amazon did just fine amid the fallout of 2008's subprime mortgage meltdown, mostly because North American consumers loved the convenience of online shopping and Amazon's low prices more than they felt the impact of economic headwinds. South America's consumers aren't apt to feel any differently if economic hardship is what actually awaits.
And for what it's worth, South America as a whole and the United States aren't exactly major trade partners. Brazil's top trade partner is China, while Argentina's is Brazil. Most of this continent's countries largely rely on one another, shielding them from tariff-prompted turbulence now surrounding the United States and its key trade partners.
Bottom line? MercadoLibre is a fantastic opportunity most people are overlooking. Wait for a pullback if you must. Just don't wait too long for a major price dip that may or may not ever arrive.
