Polen Capital, an investment management firm, published its “Polen Global Emerging Markets Growth” fourth quarter 2021 investor letter – a copy of which can be downloaded here. The MSCI Emerging Markets Index (the “Index’) declined by 1.31% in the fourth quarter as tightening global money markets, the discovery of the Omicron variant, and rising geopolitical tensions weighed on risk appetite worldwide. The Polen Global Emerging Markets Growth Composite Portfolio (the “Portfolio”) returned -4.77% gross and -5.00% net of fees for the period. For the full year, the Portfolio returned -8.97% gross and -9.87% net of fees compared to -2.53% for the benchmark Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Polen Global Emerging Markets Growth Fund, in its Q4 2021 investor letter, mentioned MercadoLibre, Inc. (NASDAQ: MELI) and discussed its stance on the firm. Founded in 1999, MercadoLibre, Inc. is a Buenos Aires, Argentina-based online marketplace company with a $44.9 billion market capitalization, and is currently spearheaded by its CEO, Stelleo Passos Tolda. MELI delivered a -33.87% return since the beginning of the year, while its 12-month returns are down by -42.48%. The stock closed at $891.69 per share on March 11, 2022.
Here is what Polen Global Emerging Markets Growth Fund has to say about MercadoLibre, Inc. in its Q4 2021 investor letter:
“An interesting comparison for SEA is our e-commerce portfolio holding MercadoLibre. Like SEA, MercadoLibre has also grown rapidly, expanding revenues by 46x since listing in 2007 to the end of 2020. Where it differs from SEA is that its operations are heavily cash flow positive. This has meant that it has been able to fund its growth almost entirely with its internally generated cash.
As Figure 1 shows, over the last five years, SEA shareholders have been diluted significantly almost every year, with the total share count rising by over 200% during the period. That means that an investor’s percentage ownership of the company has been cut by over two-thirds over this period.
In contrast, MercadoLibre’s strong cash flows have meant that it has not needed to tap equity markets nearly to the same extent. Over the same period, the company’s share count only increased by 14%, meaning that MercardoLibre investors’ percentage ownership only declined by 13%.
Both SEA and MercadoLibre have fared very well over the last five years. However, we believe that SEA’s far heavier reliance on external sources of capital make it much more vulnerable to whims of equity markets than MercadoLibre. We believe that MercadoLibre’s robust cash flow generation will be able to fully support its operations, allowing the business to continue to advance its growth aspirations independent of the market conditions.”
Our calculations show that MercadoLibre, Inc. (NASDAQ: MELI) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. MELI was in 74 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 68 funds in the previous quarter. MercadoLibre, Inc. (NASDAQ: MELI) delivered a -22.09% return in the past 3 months.
In March 2022, we also shared another hedge fund’s views on MELI in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
