Building Wealth Doc's note: For months, my friend and colleague Steve Sjuggerud has told his DailyWealth readers that stocks are in the middle of a "Melt Up" that could lead investors to enormous gains.
Today, I'm sharing an essay from Steve where he details what he calls the "ultimate 'Melt Up Millionaire'" stock.
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Last June, Yahoo was kicked out of the Nasdaq 100 stock index...
The headline story was about Yahoo's demise.
Specifically, Yahoo failed to figure out how to create an "ecosystem" that people wanted to be a part of. Apple (AAPL), Alphabet's Google (GOOGL), Facebook (FB), and China's Tencent (TCEHY) developed ecosystems that people didn't want to leave. And they became the most valuable businesses in the world.
With these ecosystems, it's a winner-take-all type of thing... It doesn't matter who's No. 2 to Facebook. The market leader is the only one that matters.
As you probably know, I expect we're on the verge of a Melt Up in stock prices – where certain stocks become untethered from reality and soar to unreasonable heights.
And I think these ecosystem-related businesses will be the biggest beneficiaries... They should be some of the biggest winners in the Melt Up.
But everyone already knows Apple, Google, and Facebook... Are there any true ecosystems out there that most people don't know about? Yes!
The company that replaced Yahoo in the Nasdaq 100 is exactly what we're looking for...
I'm talking about MercadoLibre (MELI).
Yahoo couldn't build an ecosystem. But MercadoLibre did...
MercadoLibre is the largest e-commerce company in Latin America. It's the online leader in all 18 countries it operates in.
Online shopping is a relatively new experience, especially in cultures that are used to paying for things after they receive them. In Brazil (Latin America's largest market), e-commerce sales made up just 3% of total retail sales in 2015. That's nothing!
Acceptance of online shopping in Latin America has been slower than the rest of the world... But for MercadoLibre, it just means there's plenty of room for growth.
And what really gets me excited here is that the company's business model has shifted lately...
MercadoLibre is adding additional ecosystems. For example, the company created its own payment system called MercadoPago. This could be huge – like the PayPal (PYPL) of Latin America.
Brazil is the ninth-largest e-commerce market in the world. But only 9% of the population uses the Internet to make purchases or pay bills. MercadoLibre's payment system makes it easier for people to do everything from buying stuff to paying bills to paying each other.
In short, MercadoLibre already dominates on a continent that is in the early stages of adopting e-commerce. And it's building other ecosystem businesses to go along with it.
Sure, the company is relatively unknown in the U.S. today. But it already is THE dominant player in online commerce in Latin America – a segment that is certain to grow exponentially. And it's positioned perfectly to hold on to that dominant position.
If we can learn something from Yahoo's demise, it's that the company failed to build an ecosystem that users loved. MercadoLibre is doing exactly that.
Is the company expensive? Yes. Is it overpriced? Probably. Could it double from here if my Melt Up idea turns out to be right? Absolutely.
To me, MercadoLibre is exactly the kind of stock you want to own during the Melt Up.
Good investing,
Steve
P.S. For more on MercadoLibre, I suggest checking out this video interview with its co-founder and CEO, Marcos Galperin.