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Why MercadoLibre, Perfect World, and Fred's Jumped Today

By Dan Caplinger – Feb 28, 2014 at 3:30PM

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The broader stock market did well Friday, capping February's big comeback. These three stocks did even better than the market at large. Find out more about what made these stocks soar.

The S&P 500 hit another brand-new record high, and investors closed February having recovered much of the ground they lost during the first month of the year. Yet, the relatively modest gains for the broader market paled in comparison to the leaps that MercadoLibre (MELI -0.36%), Perfect World (PWRD), and Fred's (FRED) posted today, as company-specific news helped them outperform the market at large.

MercadoLibre gained almost 11% after the Latin American online marketplace posted impressive growth figures. Local-currency sales jumped by almost half in the fourth quarter, and even adjusted for currency moves, dollar-revenue gained 30%. Payment-transaction and item volumes also posted strong gains, with earnings per share rising by 35%. Although some have feared that exposure to turbulent countries like Argentina and Venezuela could pose a threat to MercadoLibre's future, the company's MercadoPago service has served the same profit-building function that PayPal has done for eBay (EBAY 0.49%), which still owns an almost 18% stake in MercadoLibre. Shareholders have to accept the risk of emerging-market exposure, but they also stand to reap its rewards.

Chinese online-gaming company Perfect World powered ahead by nearly 12% after announcing a partnership with mobile giant Huawei to cooperate strategically in building a stronger presence in the global gaming market. Perfect World CEO Xiao Hong argues that working together will help Huawei and Perfect World make the most of their respective technological assets and user bases. Part of the deal will involve Perfect World designing customized games for Huawei hardware, including its TRON home-gaming console. Investors can expect more collaborations among Chinese companies as the nation aims to take bigger steps toward penetrating the global economy, even in areas traditionally dominated by companies from other countries.

Regional discount retailer Fred's rose more than 10% after reports that it's looking to sell itself to a host of potential buyers. Sources told Bloomberg that Fred's was in touch with Walgreen (WBA 1.14%), CVS Caremark, and Dollar General about potentially bidding for the company, with private-equity firms also among possible candidates to purchase Fred's. Analysts believe that Fred's pharmacy business is its most valuable asset, making the company especially attractive to Walgreen and CVS. After Fred's disappointing holiday quarter, the company appears determined to unlock value for shareholders, even if it means Fred's will cease to exist as a separate entity going forward.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends eBay and MercadoLibre. The Motley Fool owns shares of eBay and MercadoLibre. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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