The Motley Fool’s Take
MercadoLibre operates the most visited online marketplace in Latin America and has consolidated this leadership with adjacent offerings such as logistics and digital advertising. The business benefits from the flywheel effect (small gains boosting momentum) as its popularity with consumers brings more merchants and inventory to market, which naturally boosts buyer engagement, And so on.
MercadoLibre also owns a fintech company, Mercado Pago, which operates the third most popular digital wallet in Latin America. It is poised for rapid growth in the coming years as internet penetration increases rapidly in the region.
In short, MercadoLibre operates two huge markets – commerce and digital payments – and its strong market position in both spaces drives strong financial results. In the second quarter, revenue jumped 56% year-over-year, with gross merchandise volume up 26% and total payments volume up 84%, all on a neutral basis. currencies.
Shares of MercadoLibre recently traded at a price-to-sell ratio of 4.8, a bargain from its five-year average of 13.5. Wall Street is bullish, with its 12-month consensus price target for MercadoLibre reflecting upside potential of 50% or more. (The Motley Fool owns shares of and recommended MercadoLibre.)
ask the fool
From BT to Rutland, Vermont: When the price of a stock goes down, where does the money go?
The madman responds: The price of a stock simply reflects the last price someone was willing to pay to buy it.
Let’s say you own shares of Buzzy’s Broccoli Beer and its shares drop 10%. If you don’t sell the shares, you haven’t actually lost any money and they could go up in value again tomorrow. But for now, the shares are worth less, perhaps due to bad news about Buzzy.
The money doesn’t necessarily go anywhere – the price of the stock is simply lower, as a collectible can lose value.
From SA to Houston: I am considering investing in a company that seems to be performing well. His revenue and profits have grown at double-digit rates, and he doesn’t have a lot of debt, but his stock has fallen. What’s going on?
The madman responds: It could just be down because the overall market has crashed. Many large stocks fell sharply last year.
But you might have missed something. Maybe those double-digit growth rates were higher and his growth rates actually went down. Did Wall Street analysts expect higher earnings and did a recent quarterly report disappoint them? Perhaps the company’s profit margins are shrinking or a competitor is taking away part of the market. Read up on news related to the business and you might get a better idea of its health and the challenges it faces.
Here’s another possibility: maybe the stock has soared so much recently with eager investors driving its price up that it has become overvalued, and now it’s approaching its intrinsic value.
school of fools
Here are some ways to reduce your risk throughout your life when managing and investing your money:
Have an emergency fund. A large, unexpected event, such as a job loss or a large necessary car expense, can be disastrous without it. Try to keep at least three to six months of all non-negotiable living expenses on hand.
Have sufficient insurance. Insurance can be annoying and you’re unlikely to need it, but when you do need it (due to fire, theft or lawsuit, for example) it can save you financial problems.
Invest for the long term. If you frequently jump in and out of stocks, you’re not investing – you’re speculating. Buy stocks of big, growing companies and aim to hold them for many years, through stock market booms and crashes.
Stick to companies you’ve researched thoroughly and are familiar with. Look for healthy companies with great growth potential and competitive advantages. Evaluate the valuation of each stock and favor seemingly undervalued stocks, which should present less risk of significant loss than exciting high-flying stocks.
Avoid easy ways to lose money. These include following advice on “hot” stocks, investing in penny stocks (those trading at less than around $5 per share), investing with borrowed money, selling short stocks, day trading and getting into options, commodities or foreign currencies.
Take the easy route. You can do very well for many years if you simply invest in one or more low-cost, broad-market index funds, such as those that track the S&P 500 or the broader stock market. Also continue to invest over time.
Keep learning. The more you know about investing, the less likely you are to make mistakes. Read books about great investors and big business. Discover books by John Bogle, Peter Lynch and The Motley Fool. Read Warren Buffett’s educational letters to shareholders at berkshirehathaway.com. Spend time on our discussion forums at Discussion.Fool.com, where you can ask and answer questions.
My dumbest investment
From MM, online: My dumbest investment was buying stocks that I had heard a lot about online. The stock price fell $30, so I took my loss and sold. It quickly topped $100 per share from where I sold it!
The madman responds: Consider what would make any company’s stock soar so quickly: it would have been strong demand – many people buying stocks, so those selling stocks could sell at higher prices. Ideally, the purchase would be due to something like the company’s great growth potential, an excellent earnings report, or promising news.
With some stocks, however, and probably the one you bought, the volatility is due to it being a “meme stock” – a stock that tends to move strongly due to online hype in social media forums such as TikTok, Reddit and Twitter. Someone claiming to make big profits on a certain stock can send others on buying sprees, which in turn drives up the stock price.
If others join in the hype, the stock may skyrocket further. Of course, this can’t go on forever, and if the frenzy driving stocks higher moves in the opposite direction, it can send stocks on a new downward trajectory.
Recent meme stocks include AMC, GameStop, and Bed Bath & Beyond. All have struggled in recent years – with unprofitability, heavy debt and/or declining revenues.
Who am I?
My roots date back to 1897, when my founder started a small cider house that allegedly used apples grown by Johnny Appleseed and sold cider and apple butter from a horse-drawn cart. I introduced ice cream toppings in 1940. My portfolio includes over 40 brands, with my products found in over 80% of American homes and many restaurants. Today, I’m based in Orrville, Ohio, and have a recent market value of $15 billion. I’m a consumer products powerhouse, with brands like Folgers, Jif, Milk-Bone, Meow Mix, 9Lives, Cafe Bustelo, Sahale Snacks, and Uncrustables. Who am I?
Don’t remember the trivial question from last week? Find it here.
Answer to last week’s quiz: Photocopy