Why We Bought 30% More MercardoLibre & Own The Future Update

Today is a special Own the Future report, because there is a Part Zero. Because of the opportunity Mercadolibre (MELI) just dropped in our lap. Part Zero: What You Have To Know Right Now About Mercado Libre Part One: What You Need To Know For The Next Year Part Two: What You Need To Know For The Next 5 Years Part 3: What You Need To Know For The Next 50 Years At least that is the goal. Whether I have time to get it all done or not, I will try my best. I have a doctor’s appointment today, and next week my sister is graduating from College and being sworn in as an officer in the US Army, so no Friday report, so I’ll publish as much as possible today. Part Zero: What You Have To Know Right Now About Mercado Libre Bottom Line Up Front 49% growth…9.5 EV/FCF and 36% CAGR LT growth consensus 110% fundamentally justified upside potential by year-end. 562% Upside Potenital Over 4 Years = 68% CAGR = Medallion Fund Like Return Potential That’s the historical 10-year average PE. What if you’re worried about PE compression? Morningstar Fair Value (DCF-based) 46 PE “just” 27% upside potential this year and “just” 302% upside by the end of 2029 = 46% CAGR return potential vs 24% VC target (3X every 5 years) and 26% = 10X every 10 years pace. For MELI, we’re using a conservative blended approach. But you can see that the valuation (not accounting for the 12% crash) is between 13% to 66% undervalued. Works out to a PE of 70…for a stock growing at 36% long-term and 49% they just reported. Think that a PE of 70 for MELI is crazy? 69 PE is the median of all rolling periods over the last 20 years = 91% statistical confidence that MELI is worth 69X MELI is 43% undervalued based on trailing PE and 60% undervalued based on forward PE, and the PEG is 28 blended PE vs 36% 5 year growth consensus = 0.78 vs 2.21 median. So adjusted for growth, MELI appears to be 65% undervalued. 65% discount = 3X upside to fair value. + all that growth. Now, can you see why we bought 30 shares with such confidence? Why We Just Bought 30 More Shares (30% Larger Position) MELI is investing in its credit portfolio. Operating cash flow (the thing that Amazon has optimized for since day one, according to Bezos) actually grew by 101%. So 101% growth with 36% EPS growth consensus vs 33% historical growth since its IPO. And the price is trading at a ridiculous discount to its historical 70 blended market-determined PE. Not my opinion, that’s literally what the market has paid historically for a MELI growing at 33%, and now it’s growing 36% (10% faster) with this quarter's growth of 101% on the metric that shows whether or not the growth spending is paying off. The thesis is intact, and now MELI represents a 3.5% SpaceX/Anthropic-sized investment for ZEUS. Management That Believes In Investing In Growth Over Short-Term Profits? That Sounds Like Jeff Bezos 20 Years Ago This is EXACTLY what you want MELI to be talking about. Wall Street’s concerns about short-term margins? Short-sighted. Long-term growth spending = more growth = more discounted cash flow and higher intrinsic value. That’s as simple as investing gets. 1st principles investing. The way to confirm that the thesis is intact? Watch the operating cash flow growth. If the spending is working, the operating cash flow growth will be strong. 101% growth in Operating free cash flow in a negative FCF quarter because management is investing in growth? The math is mathing.😉🥳 MELI is becoming the SOFI of Latin America. A young continent of consumers who are growing richer, and MercadoPago is becoming the Mastercard for many of these consumers. It’s like Apple. Build an entire ecosystem. Make consuming and financing your dreams = MELI. That’s the goal for MELI. To become like Amazon/Mastercard/JPMorgan for Latin America. And they are doing it well. Navigating credit risk, growing their customer base, getting customers to use more services, buy mo