4. MercadoLibre, Inc. (NASDAQ:MELI)
Number of Hedge Fund Investors In Q1 2024: 79
MercadoLibre, Inc. (NASDAQ:MELI) is a Uruguay based eCommerce company. The firm’s business is the dream of every eCommerce company since it has managed to achieve the single biggest metric that firms in its industry target. This metric is fast delivery to areas uncovered by rival services. MercadoLibre, Inc. (NASDAQ:MELI) claims to deliver 80% of its packages within two working days, through a proprietary logistics network that leverages first mile collection to pick up the packages, receiving and consolidation centers to sort them and use other nodes to ship them to the right address. This enabled MercadoLibre, Inc. (NASDAQ:MELI) to deliver a whopping 71% growth in net income during its first quarter for a profit of $344 million. The firm enjoys a strong competitive moat because of its logistics network, and it is also diversifying its business to include digital payments.
On this front, here’s what Harding Loevner had to say about MercadoLibre, Inc. (NASDAQ:MELI) in its Q1 2024 investor letter:
MercadoLibre started its payments business, Mercado Pago, in 2003, only four years after launching its namesake e-commerce platform. It has since become the leading private payment provider in the region, accounting for 13% of all retail sales in Latin America, both online and offline, more than any single card issuer or private form of payment other than cash. Nearly three quarters of its payments now take place outside of MercadoLibre’s online site. Mercado Pago comprises more than half of the company’s total earnings and cash flow, which has helped to fund investments elsewhere—especially in logistics—that have served to reinforce its lead in e-commerce.
Mercado Pago has been especially important to MercadoLibre’s success in Mexico, the region’s second-largest economy and MercadoLibre’s third-largest market, accounting for more than 20% of its sales. With the largest unbanked population in Latin America, many online shoppers have had to pay cash on delivery, a sometimes cumbersome process that Mercado Pago was able to help resolve. For more than half of MercadoLibre’s users, Mercado Pago was the first digital payment method available to them. In addition, more than half of the credit offered by Mercado Pago went to customers getting their first access to credit ever; half of them were women, who have been particularly underserved by banks
. . . .MercadoLibre and FEMSA have built valuable businesses for themselves in payments, ones that also address a pressing need for many customers of their retail businesses. There is still much work to do in promoting financial inclusion in Latin America compared to many other emerging markets (see chart above). That also means there is a continuing opportunity for MercadoLibre, FEMSA, and other companies to lower financial barriers for customers while at the same time differentiating themselves from their competitors and boosting their own businesses.
