Great work as always. Any quick thoughts on MELI? No position but wonder if this is an opportunity (overall market exuberance might keep me away from anything though...)
MELI is doing a lot of things well. But there was a sell off after the most recent earnings. Margins and profit were declining. I think the two major concerns are capex and lending.
MELI is entering a capex cycle. They are building out their distribution network. They are selling smaller ticket items too. I think both of those things can be good for the long term. (Faster delivery, more habitual buying, higher route density, etc). Not really a major concern for me.
On lending credit, they’ve been expanding from personal loans to credit cards, and continue to grow their portfolio. Allowance for bad debt increased, which is ok as long as it grows linearly with the portfolio size. This one is more concerning to me, just because lending is hard to measure in the moment. In lending, success or failure tends comes about years after decisions have been made (maybe no/low defaults in year 1, but harder to say in advance for year 4 or 5). Not a fan of that dynamic.
Great work as always. Any quick thoughts on MELI? No position but wonder if this is an opportunity (overall market exuberance might keep me away from anything though...)
Appreciate it!
MELI is doing a lot of things well. But there was a sell off after the most recent earnings. Margins and profit were declining. I think the two major concerns are capex and lending.
MELI is entering a capex cycle. They are building out their distribution network. They are selling smaller ticket items too. I think both of those things can be good for the long term. (Faster delivery, more habitual buying, higher route density, etc). Not really a major concern for me.
On lending credit, they’ve been expanding from personal loans to credit cards, and continue to grow their portfolio. Allowance for bad debt increased, which is ok as long as it grows linearly with the portfolio size. This one is more concerning to me, just because lending is hard to measure in the moment. In lending, success or failure tends comes about years after decisions have been made (maybe no/low defaults in year 1, but harder to say in advance for year 4 or 5). Not a fan of that dynamic.