We recently compiled a list of the 10 Best High Growth Stocks To Buy. In this article, we are going to take a look at where MercadoLibre, Inc. (NASDAQ:MELI) stands against the other high growth stocks.
At Wall Street, long-standing investment strategies are being reshuffled as the monetary and political landscape evolves. Reallocation is the name of the game in a week where the S&P 500 and Nasdaq experienced declines of 1.97% and 3.65%, respectively, marking their largest weekly losses since April. Conversely, the Dow advanced 0.72%, and the small cap-focused Russell 2000 climbed 1.68%. A few tech mega-caps—led by Apple Inc., NVIDIA Corporation, Meta Platforms, Inc., and Amazon.com, Inc.—have dominated stock market returns, especially over the last 18 months, a trend that is evident in the diverging performances of the largest 50 stocks in the S&P 500, weighted by market capitalization. This trend, however, seems to have reversed sharply recently, with mega-caps selling off while the average stock holds close to record levels.
Investors are grappling with this sudden shift, and one possible explanation is that mega-caps may have become too expensive. “The stock market is experiencing a long overdue rotation,” said Glen Smith, chief investment officer at GDS Wealth Management. “Investors are pulling money out of high-performing big tech stocks and reallocating it to other market areas.” Notably, tech giants like NVIDIA Corporation, previously popular among options traders, saw a notable shift in sentiment, with demand for bearish puts surpassing calls at the highest rate in five months. “It signals a different regime,” said Erika Maschmeyer, a portfolio manager at Columbia Threadneedle Investments. “The market could be choppier and more volatile, with more dispersion than we have seen.”
This divergence has reassured some Wall Street experts who had been concerned about the rally’s dependence on a few massive tech stocks. Additionally, rising optimism about forthcoming interest rate decreases from the Fed has bolstered smaller and more cyclically oriented names. In that regard, the Fed’s battle against inflation might be nearing its end after U.S. consumer prices unexpectedly fell in June. Chicago Fed President Austan Goolsbee considers the latest inflation data “excellent” and describes persistent housing inflation improvement as “profoundly encouraging.” However, Scott Rubner of Goldman Sachs is skeptical about buying the dip. The tactical strategist believes the S&P 500 has little room for upward movement from its current position. He points out that historically, July 17 has marked a turning point for the equity benchmark, with data dating back to 1928 supporting this claim. Rubner notes that August typically sees the worst outflows from passive equity and mutual funds.
On another note, the U.S. economy added slightly more jobs than expected in June. Nonfarm payrolls increased by 206,000 for the month, surpassing the Dow Jones forecast of 200,000 but falling short of the revised May gain of 218,000, which was significantly reduced from the initial estimate of 272,000. However, the unemployment rate unexpectedly rose to 4.1%, matching the highest level since October 2021 and presenting a mixed signal for Federal Reserve officials considering their next monetary policy move. The jobless rate was forecasted to remain steady at 4%. Although June job creation exceeded expectations, much of this growth was driven by a 70,000 surge in government jobs. Additionally, the health care sector, a consistent leader, added 49,000 jobs, while social assistance contributed 34,000 and construction increased by 27,000.
The 2024 presidential election is heating up, with President Joe Biden opting not to run for re-election and Republican nominee and former President Donald Trump continuing his campaign after surviving an assassination attempt. Historically, presidential election years have often brought strong returns for stock investors, influencing short-term economic policy. However, recent events suggest that this election year may be far from typical.
Our Methodology
To compile our list of the best high growth stocks to buy, we identified companies with strong sales growth over the past five years. These companies were then ranked based on the number of hedge fund investors in the first quarter of 2024, out of a total of 919 hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A customer using their phone to access an online commerce platform.
MercadoLibre, Inc. (NASDAQ:MELI)
Number of Hedge Fund Holders: 79
Annual Sales Growth Over the Past 5 Years: 59.37%
MercadoLibre, Inc. (NASDAQ:MELI) is a leading e-commerce technology company in Latin America, headquartered in Buenos Aires, Argentina. Founded in 1999, MercadoLibre operates primarily through its flagship platforms, MercadoLibre.com and MercadoPago.com, offering a wide range of solutions for individuals and businesses involved in online buying, selling, advertising, and payment transactions.
In May 2024, MercadoLibre, Inc. (NASDAQ:MELI) reported impressive first-quarter earnings, with revenue reaching $4.3 billion and earnings per share (EPS) at $6.78, surpassing analyst expectations of $3.84 billion in revenue and $6.10 in EPS.
According to 14 Wall Street analysts, the average 12-month price target for MercadoLibre, Inc. (NASDAQ:MELI) is $1,921.82, with a high forecast of $2,150.00 and a low forecast of $1,450.00. This represents a potential 22.14% increase from the last trading price of $1,573.40.
For the March 2024 quarter, 79 of the 919 hedge funds tracked by Insider Monkey had investments in MercadoLibre, Inc. (NASDAQ:MELI). Among these, Rajiv Jain’s GQG Partners held a substantial stake valued at $1.2 billion.
Harding Loevner Emerging Markets Equity Strategy stated the following regarding MercadoLibre, Inc. (NASDAQ:MELI) in its first quarter 2024 investor letter:
“Another prime example of how alternative payment systems can boost a company’s core offering is MercadoLibre, Inc. (NASDAQ:MELI), Latin America’s largest online retailer, which we added to the portfolio during the quarter. Since we last wrote about the company four years ago, its management has done a great deal to further differentiate its offerings from those of rivals in a highly competitive industry, leading to market-share gains across the region. In the same way that the company built its own fulfillment infrastructure to improve the customer experience in areas where third-party delivery services were lacking, it has built its own payments and credit infrastructure to otter better shopping experiences to its customers and reduce barriers that have otherwise discouraged e-commerce adoption.
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…” (Click here to read the full text)
Overall MELI ranks 5th on our list of the best high growth stocks to buy. You can visit 10 Best High Growth Stocks To Buy to see the other high growth stocks that are on hedge funds’ radar. While we acknowledge the potential of MELI as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MELI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. This article is originally published at Insider Monkey.