Many investors have a home bias when looking for stocks to buy. This is understandable, as familiarity can feel safer. But when it comes to world-class growth stocks, some of the best opportunities exist beyond these shores.
Right now, my best growth share to consider buying and holding for the next 10 years is MercadoLibre (NASDAQ:MELI). And as the name suggests, you won’t find this sandwiched somewhere between Marks & Spencer and NatWest in the FTSE 100.
So why this particular stock?
A typical day in Buenos Aires…
MercadoLibre, which means ‘free market’ in Spanish and the language spoken in most of the 18 countries the firm operates in across Latin America. The Montevideo, Uruguay-based business runs the region’s leading e-commerce marketplace and fintech platform (digital wallet, payments, insurance, investments, etc).
Its biggest markets are Brazil, Mexico and Argentina, where more people are choosing to send 100% of their salary to its Mercado Pago account. This app pays attractive interest, unlike traditional banks, and now has 72m monthly active users.
Incoming CEO Ariel Szarfsztejn recently described a typical routine of a customer in Buenos Aires. In the morning, they might take the bus or train to work, paying with MercadoLibre’s app. Then use its QR codes to pay for lunch, while possibly surfing its e-commerce site.
On an evening, they may buy groceries through the firm, or pay for them with its app in store. Check their stocks or crypto on Mercado Pago. And then maybe unwind with some entertainment streamed through its Mercado Play app.
In other words, the company’s becoming increasingly interwoven into daily life across Latin America. And that bodes very well for its future earnings potential, with online shopping and financial services taking off across the region.
Continent-sized growth opportunity
In the past 10 years, revenue has leapt from $652m to nearly $21bn last year. That’s a roughly 32 times increase! Naturally that torrid rate of growth can’t continue forever, but Wall Street still expects top-line growth of 37% this year. Then above 20% over the following three years.
But the long-term opportunity remains incredibly large. Last year, MercadoLibre still only had 100m buyers out of a population of 650m people.
Meanwhile, a third pillar is emerging alongside e-commerce and fintech. Namely digital advertising revenue, an opportunity management describes as “huge“. Like Google and Meta, the firm’s sitting on vast amounts of valuable consumer data.
We think that Latin America will get to UK standards or even Asian standards of e-commerce penetration. There’s no reason why that will not happen…The size of our business…is huge today, but it could be even bigger in the coming years. Ariel Szarfsztejn, speaking to Scottish Mortgage Investment Trust.
19% dip
Now, one risk is that MercadoLibre’s facing rising competition from Shopee in Brazil and Amazon elsewhere. To combat this threat, it has cut the free‑shipping threshold while investing heavily in fintech infrastructure.
Consequently, this is putting pressure on margins, which is worrying some (short-term) investors. This is reflected in the share price, which has fallen 19% since hitting a record high back in June.
I think this dip presents an attractive buying opportunity that long-term investors should consider. The stock’s now trading at 25 times forecast earnings for FY2027 — very cheap compared to historical norms.
