MercadoLibre is Latin America’s dominant e-commerce market


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The growth of global e-commerce is a megatrend worth investing in. In Latin America, one company dominates the e-commerce market: MercadoLibre.

MercadoLibre is like eBay and PayPal rolled into one — except it’s growing much faster. It operates a marketplace business (Mercado Libre), provides logistics services for sellers (Mercado Envios), extends credit to merchants (Mercado Credito), and has a rapidly growing digital payments business (Mercado Pago). Fourth-quarter revenue rose 74% year over year — less than the triple-digit percentages it hit in 2020, but with plenty of room for growth.

So far, Mercado Pago has 28 million users in Brazil and great potential for growth. And recently, MercadoLibre has started offering a cryptocurrency trading tool that could encourage interaction with the app.

Announcing the company’s fourth-quarter results, Chief Financial Officer Pedro Arnt said, “Even with physical stores reopening, customers in Latin America have embraced online shopping, paving the way for continued long-term growth in the region.”

The recent sell-off in technology and growth stocks in the market has given investors a chance to buy MercadoLibre at a relatively cheap valuation: a price-to-sales ratio of 8.2 — down from 25 more than a year ago. (The Motley Fool owns shares of MercadoLibre and has recommended MercadoLibre.)

ask the fool

From CH in Saginaw, Mich.: If a company pays out more dividends than it makes in earnings, should I steer clear?

The fool replies: Not necessarily, but it’s a good idea to do a little more research on the company. What you’ve noticed is called a company’s “payout ratio” — the sum of its annual dividends per share divided by its earnings per share for the year. A ratio below 1 (100%) means the company has enough earnings to meet its dividend obligations, and a much lower ratio typically reflects plenty of room for future dividend growth.

On the other hand, a ratio above 100% reflects a company paying out more dividends than it generates in net income. That’s not necessarily a bad thing if the company has enough cash to deal with it and if it’s just due to a temporary problem, such as a fire. B. to a problem in the supply chain. (If the company faces long-term problems, it may end up cutting, suspending, or eliminating the dividend.) A high payout ratio warrants a closer look at what’s happening at the company.

From DK in Keene, NH: My mutual fund appears to be closed to new investors. Should I be worried?

The fool replies: nope Mutual funds occasionally close to new investors when their managers have more shareholder money to invest than great ideas on where to invest it. That way, they don’t have to pour shareholder money into second- or third-tier investment ideas. (Some funds adopt a “soft close,” meaning they strictly limit new investment, usually to existing shareholders.)

The School of Fools

If you want to manage your finances more effectively and be a better investor, there are many books that can help you. Here are some that you can borrow from your local library or bookstore:

  • I’ll Teach You to Be Rich, Second Edition: No Guilt. No excuses. No BS. Just a 6 week program that works by Ramit Sethi (Workman, $16). These well-organized steps can put you in much better financial shape and improve your financial future.
  • The Psychology of Money: Timeless Lessons on Wealth, Greed, and Luck by Morgan Housel (Harriman House, $19). This book offers insightful insights into how (and why) people make good and bad financial decisions.
  • The one-page financial plan: An easy way to be smart with your money by Carl Richards (Portfolio, $25). Having a plan on how to manage your money and achieve your goals is crucial.
  • The Little Book of Value Investing by Christopher Browne (Wiley, $25). That’s Warren Buffett’s investing style, and it’s clearly effective. The book can help you find and evaluate promising undervalued stocks.
  • Great by Choice: Uncertainty, chaos and happiness – why some still thrive by Jim Collins and Morten T. Hansen (Harper Business, $24). In order to be successful in investing, it helps to understand what makes different companies succeed — or fail.
  • The Little Book on Behavioral Investing: How Not to Be Your Own Worst Enemy by James Montier (Wiley, $25). Behavioral finance is a fascinating subject and worth learning about to minimize financial mistakes.
  • The Motley Fool Investment Guide: Third Edition: How the Fools Beat the Wise Men of Wall Street and How You Can Too by David and Tom Gardner (Simon & Schuster, $22). The Motley Fool’s first book, now updated, provides guidance on evaluating companies and investing in stocks and/or index funds.

My stupidest investment

From ES, online: Years ago, I was a total novice and would frequently search online for “best stocks of the moment.” In the end I found a tiny supply. In hindsight I now see that it was pumped artificially (that’s what I thought it was in the first place – someone advertised it). I foolishly bought $1,000 worth of stock and actually tripled my money in just a few days. I didn’t sell though – again I was a complete novice. My loss is almost 100%.

I’ve learned my lesson: I’ll never fall for that pump-and-dump system again, and if I end up riding a wrong wave, I know I have to jump off immediately. It was a tough lesson to learn, but a great learning experience in the long run.

The fool replies: Don’t be too hard on yourself — even the best investors make some unfortunate moves, and new investors can make many. Because of this, most investors, whether new or experienced, can benefit from reading and learning more about investing.

As you now know, many penny stocks (which trade for around $5 a share or less) can be manipulated in “pump and dump” schemes. This is where scammers hype stocks to lure new investors into buying, driving stock prices up — only to then dump their own shares at the higher prices, driving stock prices down and killing the naïve investors burn.

Who am I?

My roots go back to California in 1980 when I was founded as an applied molecular genetics company. Early efforts included trying to breed chickens faster, and an early success was cloning a gene that led to my successful drug Epogen, which treats anemia. Today, with a current market value of $135 billion, I am a biotechnology powerhouse primarily focused on cardiovascular disease, oncology, bone health, neuroscience, nephrology and inflammation. My top sellers include Aranesp, Enbrel, Kyprolis, Neulasta, Nplate, Otezla, Prolia, Repatha and Xgeva. I’m one of the 30 companies in the Dow Jones Industrial Average. Who am I?

Don’t remember last week’s question? Find it here.

Last week’s trivia answer: J&J Snacks

The lobby of the Hotel Jerome in Aspen.

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