The Canadian Investor - 10 high conviction stocks, Mercado Libre and the bear case for bonds

Episode Date: May 31, 2021

In this episode of the Canadian Investor, we talk about: How credit card companies such as Visa and Mastercard make money The new explained series episodes on money Braden’s top 10 companies based on personal conviction The bearish case for bonds in the current macro environment A breakdown of Mercado Libre, the latin america e-commerce/payment processor We hope you enjoy this episode! Ticker of stock discussed: CSU.TO, GOOG, V. MA, U, ADSK, ISRG. BAM-A.TO, BAM, TCEHY, TFII, MELI Getstockmarket.com Canadian Investor Pod Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital See omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

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Hope y'all had a good short week with Monday being a holiday. How you doing, Simon? I'm doing well. Excited to record and get ready for the weekend. Yeah, and we're already coming around to the weekend again here. I'm playing some golf after we record this because I am dodging the snow that is in Toronto right now. I deserve this, by the way. I was making fun of Edmonton last week for the podcast

that went out on this latest Monday for it snowing there. And look, it's snowing in Toronto now, so I deserve all of it. Yeah, and let's not forget you've made fun of Ottawa a few times in the past for being so far up north as well, so let's not forget about that. Well, now the northern cities are warmer, so I'm up north right now. That's great. Okay, so we got a jam-packed episode here. We're going to talk about the new Netflix series that is about money.

Is it Vox? Who does it? Who does it? I think so, yeah. I think it's Vox. The Explained series, right? The Explained series, yeah. We're going to talk about my new model that I've been working on for Stratosphere

and some nuances to that. Simon's going to talk about bonds. And then I'm going to end the episode with Mercado Libre, ticker M-E-L-I. All right. So before we get into that, let's talk about credit card economics. And I'd be rich if I had a penny for all the times we talk about this, but I still get questions about it. And I still think it's worth emphasizing how the credit card business works from the standpoint of Visa and MasterCard. Visa and MasterCard are the largest positions by weighting in my portfolio and other than Constellation Software, actually. It's my largest US holdings. Anyways,

It's my largest US holdings. Anyways, the credit card business is very misunderstood overall in terms of the actual payment network providers like Visa and MasterCard. So I made a graphic to help explain it. I posted it on my Twitter at Brado Capital. It's there if you want to see it. And it goes through an exercise of a 2% processing fee, which is by example only, because it can range from about 1.5%

all the way up to even 4%, depending on what are called interchange fees. I'm going to get into what those are in a second, but we're going to use a 2% processing fee, which is very normal on a transaction. Okay, so let's go through this. Simon, I go up to your store. You sell Simon shoe store, SSS. It rhymes. You're going to have to make a shoe store after this. And I give you a hundred dollars. I pay, I swipe my visa. I swipe

my mastercard, whatever it is. 2% comes off the top. You, the merchant, Simon Shue store, gets $98. So the 2% in that transaction, where does it go? So around 0.13% or 0.14% on average goes to the payment network Visa or MasterCard. That's not a lot. So on a $100 transaction, they only collected about 14 cents in this example. Now, most of it, about close to $1.50 of it, or $1.44 in my example, goes to the bank that actually issued the credit card. This is the bank of the credit card that I used when I paid at Simon's Shoe Store. They got about $1.50 in my example, $1.44, so 1.44% in this 2% processing fee example. That issuing bank that gave me the credit card, they take on the credit risk and they actually collect the interchange fees. The issuing bank collects that. The payment network

gets paid that 0.13, 0.14% or 14 cents in this example for the assessment fee. cents in this example for the assessment fee. Now the other about 40 cents or so goes to Simon's bank, the bank of the merchant, or also known as the acquirer bank. So it's the bank of the merchant, in this case, Simon's shoe store. So in that 2%, a very small fraction went to the payment network. But it's like a death by 1000 paper cuts, they're collecting this tiny little sliver fraction on every time someone uses a cashless transaction on their network. And so I just wanted to clarify how those things work. The bank collects most of it, they're taking on the credit risk um and the acquired bank even collects a fair bit of it so hopefully this graphic if if all of what i'm saying is a lot to understand on the podcast at brado capital i posted it yesterday uh simon walk us through this

new netflix series i watched it as well i binged it i thought it was decently well done yeah yeah i think uh for the most part that uh explains series i find them really interesting there's different topics they tend to come out with like a topic and then we'll have four or five episodes on them so the most recent one was the uh money series i've explained if you have netflix you'll be able to watch it they're really well made I thought obviously there's some concepts for people that have been listening to us for a while or if you've just listened to Braden's credit card explanation there's some concepts that you'll learn

in that but they're about 20-25 minutes each really easy to watch so the five installments there's one about get rich quick schemes. It's really interesting because it talks about a lot of the things that we dump on in terms of, you know, those Forex exchange and stuff like that. Those, those bros on the YouTube commercials that are trying to sell you some, you know, how they became rich. Yet, if they're so rich, why are they selling these products? That's always my question. That's the million dollar question you got to ask yourself right there. Exactly. The second one is about credit cards and specifically a bit more credit cards, but what kind of credit cards or what kind of consumers are the most profitable for credit

card companies and especially what kind of credit card consumer yourself you'll want to be. So that's really interesting. You can really maximize the usage of credit cards. There's even a guy that I remember he gets trips and stuff everywhere just because he has what like a portfolio of 20 or 30, if not even more, credit cards. The third one is about student loans. That probably applies a bit better to the U.S. and Canada because our education typically is more affordable in Canada. But obviously a lot of people do have student loans and how it can really impact your savings altogether and really weigh on you for a long time. It's really relating to debt.

The gambling one is really interesting as well. So it explains how especially the stock market and various things can have a bit of a gambling component, especially when you look at the trading component. And the last one is about retirement. So just some basic concepts about retirement, how much you should have saved if you want a comfortable retirement, the different kinds of pensions over time, how they've evolved, how the risks went from businesses bearing most of the risk to the actual employee or the individual bearing most of the risk and having to be financially

literate, which is one of the big reasons, obviously, we do this podcast is to help people take care of their, you know, of their financial well-being and retirement and pensions, especially, obviously, the fine contribution pensions are a big part of that. Yeah, two thoughts there. One, I like that they talked about gambling and some of the stuff going on on Robinhood in the same conversation. Because let's not kid ourselves, that is pure gambling. And I honestly, I really don't know how these brokerages sleep at night when they get you to sign up for their app and then you load on money and they give you a free stock like air quotes free stock and you actually have to scratch it off on your

screen like it's a like a scratch off ticket that's that is not right dude that's that is not right you they know what they're doing there and uh they're incentivized to act poorly which is just annoying um and then the retirement one yeah it was interesting to see the transition over time from the pension kind of taking care of you to you got to figure out your retirement on your own these days, man. And that's why I do, and you as well, that's why we get up and work hard on this podcast. Because these things matter, man, that the responsibility has transitioned to individuals. And you got to take care of it, man, you really do. And I think that's, I think we're doing a pretty decent job here, Simon. Yeah, yeah. And especially when people don't aren't financially literate, and they have defined contribution pension, for example,

and they give that money over to a, you know, a financial advisor who's supposed to have their best interests at heart, but then they put them in these like two, 3% mutual funds. People, I encourage you to really, if you have something like that, whether it's an RSP locked in RSP or DC pension, if you look at the fees and you have some very high fees, take a compound income calculator and just look at how much it will affect your retirement savings over a long period of time because it may not sound like much but 2% I've done it myself can cost you hundreds of thousands of dollars over a long period of time depending how much you're saving so that's something I

think we we harp on fees a lot but that's the reason why we harp on fees because if you can get the same products for basically no fee or very low fee That's something I think we harp on fees a lot, but that's the reason why we harp on fees. Because if you can get the same products for basically no fee or very low fee, you're getting that extra return essentially for free. So that's something to keep in mind. And I thought they did a good job of explaining that. Obviously not in too much detail. And for the gambling, a quick note not specific to the netflix money series but you know what's the wild west really is when people are getting into crypto but specifically

altcoins or shit coins that we kind of refer them to you know there's it's not very regulated and you typically see people being offered 100x leverage. And so if anyone's looking to get into crypto and they don't know much about it, just be careful about that. Because they don't care really about you and you just need a small downturn and you get wiped out. That's what it is when you're debt levered. The casino always wins. Yeah, exactly. And they protect themselves via margin calls. So the casino always wins. Yeah, exactly. And they protect themselves via margin calls. So the casino always wins, right?

This is no different. Exactly. I mean, I'd rather go to the casino, have a beer in my hand, and play some blackjack than do whatever that is, man. Like, honestly. Or, you know, bet on just a number at roulette. You'll have better odds than me. Yeah.

You do have better odds, honestly. And at least, you know, you're gambling doing that. Yeah, yeah, exactly. At least there's no, there's no confusion about what you're doing. Fair enough. Okay. Moving on. So I've been reworking the stratosphere score. I've honestly gone out of my way to simplify it, focusing on quality and growth. And I also have a new in hand. And that's how I do it. That's how I size positions, what percentage of each company makes the percentage of my portfolio. And I try to rank them and I try to size them by what is called the Kelly criterion, which is, we've talked about it on this podcast before, but it's a method to rank based on possibilities that you're, that you're right. And so I rank my personal conviction and I shared on Twitter, what those top 10 are top 10 ideas in the model ranked by conviction. And then Simon, I want you to tell me if you see any themes, your general thoughts, but here they are in order.

Number one, to no one's surprise, is Constellation Software, which trades on the TSX, which is nice. That's csu.to, alphabet, ticker goog, Google. Visa, ticker V, MasterCard, ticker goog google uh visa ticker v mastercard ticker m a unity software the gaming engine ticker u autodesk ticker adsk intuitive surgical the robotic surgery company called isrg which i can't wrap my head around the valuation but but I'm close. From a business perspective. It wouldn't be the first company. No, no. I can't get there on valuation.

It's really hard to get there on valuation. That's why I don't own it. But damn, it's a good business. I don't know if it's worth like the 90, almost 100 billion it trades for today, but I don't know. Brookfield Asset Management, ticker BAM. almost 100 billion it trades for today but i i don't know uh brookfield asset management ticker bam it's the best ticker by the way uh tencent ticker tcehy and tfi international the very underrated trucking and logistics company on the tsx ticker tfii there they are

that's them ranked i didn't try i try not to tinker with the order too much. I just went by what they are on the, on the database. And this is what I came up with. I would say there's probably three constants I see there are three teams. First one is obviously tech, second one payment, and then third one, good management. I think those, you know, probably covers all of them right there. Yeah. Yeah. It's a lot of like founder-led management for one. Maybe not as much on the big, on the large caps.

Like when I say large cap, I mean like mega cap. But I agree with that. That is, I think that's objectively correct. Yeah. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people

that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. I agree with that. Yeah, just on the spot quickly just trying to to find some content those are the three things that quickly popped in mind for me yeah fair enough okay well there they are uh let's talk about bonds or puke bonds i like i'm i'm throwing up in my mouth when i say bonds but um let's talk about them yeah yeah so i want to go over why I don't have any bonds in my portfolio because I see a lot of risks in bonds right now. So I'm going to go over some

points. People tend to think about bonds being very safe, but I have some arguments that may make you think twice about holding bonds. This is my personal view. Obviously, do your own due diligence when it comes to bonds, but this is why I have zero exposure to bonds. So the first reason is right now, they're very low yields. If you look at the VCB.TO, so it's a Vanguard corporate bonds, it's currently yielding 2.75%. I might be off a couple basis point, but that's about it. Excluding the yield, it's flat over the past year versus the S&P 500, which is up 30%, excluding dividends. Although bonds will look like a good safe bet, you're really losing money when you're factoring in inflation. Official data in the US came out in the past month,

so for April, and it's already showing signs of inflation and official data. I'm talking here about CPI, the Consumer Price Index. It has its limitation, but it is an official government data. I think personally, it's actually reasonable to expect prices for things that you purchase.

So if you make a basket for things that you purchase. So if you make a basket of things that you purchase regularly, I don't think it's out of the realm of possibility this year we'll see 5% to 10% inflation. So that's my personal view. I could be wrong on that, but we're already seeing signs. In the US, the Fed is getting a lot of flag because they were saying a few months ago that there would not be any inflation with all the stimulus they're doing they were saying that it is required now that we're starting to see signs of inflation especially with the CPI the Fed has actually changed its tune a little bit saying that it's a transit transitory is a term that they're using meaning that it's

temporary it's uh we'll see things kind of die down a little bit i'm not sure i really agree with the fed on that because things are reopening people have a lot of savings they want to spend on things i think we'll continue seeing prices go up and that includes asset prices. The third one is there's very little price upside because of low interest rates and inflation. So if rates go up, bond prices actually go down because they want to align. So the market will align them with what the market is currently commanding in terms of interest rates. So it kind of works in an inverse matter. commanding in terms of interest rates. So it kind of works in an inverse matter. So that's not a good outcome for bond ETFs, since the value will go down to line up with the current market price or yields that are demanded, like I just mentioned.

People might say, well, okay, I'll just buy the actual bonds and hold them until maturity. The issue with that is if you hold the actual bonds, you'll get the principal back if you hold on to maturity. But the problem is the interest you're getting on those will not be keeping up with inflation. So you're kind of back at that same problem. If you get into government bonds, they're typically seen as being safer than corporate bonds. I personally think that it's not really all that true. The reason for that is government bonds are risky because they're expanding their balance sheets. Central banks are really expanding their balance sheets and governments are, you know, with all the stimulus that's gone out, they're getting more and more

in debt. And there's really, there's no backstop like you would have with corporate bonds, because corporate bonds, worse comes to worse, they have assets. And if they go bankrupt, then bonds are first in line to recoup some of those assets. And you typically would get back as a general rule about 40% of the value of the bond, get back as a general rule about 40% of the value of the bond if the company goes bankrupt because those assets are being sold and then bondholders and debt holders are actually being paid out. When it comes to interest rates, just to get back to that, you're seeing interest rates that are starting to tick up. So I went on the Bank of Canada website, everyone can go on there as well, and the Government of Canada marketable bonds, go on there as well. And the Government of Canada

marketable bonds, you can see that the interest rates are actually starting to tick up what the market is demanding. So what this means is the market is demanding a higher interest rate because they see potentially some increased risks with those sovereign or government bonds. Those government bonds, because the governments have issued a lot of debt, typically governments will not pay their debts. What they do is they simply issue more bonds to pay the current ones that come to maturity. So it's kind of a vicious circle that happens. If the market doesn't want the new debts, if the government tries to refinance and the market says, you know what, we're not what, you know, we don't think you're good for it,

then what typically will happen is the interest rates will go up for the new debt issued by the government. But that will create a problem with the government because if the interest rates go up, then they owe more and more money. And eventually that could lead to a default. And if the government bonds actually or the government defaults, then you would lose a lot of your principal, if not all, because they don't have those assets to be backed up. And we've seen that in Europe, at least in Europe, there's a backstop in place with the euro

because you have countries that are a bit more financially stable that can help countries like Greece. But, you know, a country like Canada or the US, I mean, you know, there's not really any backstop. I don't want to cause anyone to panic or anything like that. But with the amount of debt being issued, it's definitely a risk. So if no one, you know, if people are not looking at that as being a risk, I think they're really putting their head in the sand right there. And obviously, governments can always increase taxes, but then that can create other problems itself. If they increase taxes too much on corporation or residents, then you can have money that flees out of the country. So that's really a bit of a vicious cycle that can happen. So those are really the big reasons why I'm not a

big fan of bonds right now. I don't own any in my portfolio. I don't think cash is a solution because cash is somewhat like the same issue as bond, right? You put that in a savings account, you're going to get very little interest. you know the solution for that is probably you know there's really three main solutions in my mind so you know you invest in stocks like we do um you can invest in real estate although the price of real estate is getting more and more expensive so is the price of stocks and the last but not least personally i believe in bitcoin for that same reason because there's a cap on the toll supply so in my view it is a good store of value so those are really the three main options for me when it comes to investing I really with the current conditions I'm I don't even consider

bonds it's just there's just too much risk I know they're typically seen as safe assets but when you actually start digging into the fundamentals of bonds, you know, there's a real question mark as to are they really safe? takes beyond this because you know the macro landscape i think 20 to 30 times better than myself but i also own no bonds and i'm happy about that and i would say the reason number one that i don't is not because of all the reasons you're mentioning, which are valid, is just that my time horizon is so long. And most people's time horizon is fairly long. And I think that over time, I expect to see a much better return in stocks. Yeah, and that's a great point. And various other assets.

But we're saying the same thing, just in different ways. And if we were in 1980, you know what? I think it would be foolish for us to not have any bonds. It would be an 18% tenure. Exactly. Come on, give me that all day. That's it. So it's really about, you know, unfortunately, like bonds are very affected by the macro

environment. That's just the reality. That's just what it is. Stocks can be as well. But good companies, like we've said, they tend to perform well regardless of the macro environment. But bonds macro has a big impact on them. And look, if I, like I said, if I was 1980, like in 1980, I'd probably have like 50-50 bond and stock allocation. Well, you'd be out of your mind not to, right? That's it. Like you're getting almost,

you know, 18%, like you said, 15-18%. Anyone doesn't believe me, just Google or ask your parents if you're about. It's wild, eh? Yeah. When my parents bought their first house, they were saying, telling me that they were paying about like 15% interest on their mortgage. Yeah. So anyway, it's just a little breakdown, but now I'll leave it to you to, you know give us uh a bit of an overview of what mercado libre is uh which i'm a big fan of in terms of company probably falls in the same bucket for me as shopify um you know i'd buy it if it wasn't a such a high valuation and i feel like at some point i'll probably just pull the trigger what you know what? I'm with you. I just think that... Okay, let's talk about that for a second before I get into Mercado. Because

from a valuation perspective, you won't be able to find a single metric that'll tell you Mercado Libre is a cheap stock. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email,

every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. You won't be able to find it on sales, on EBITDA, on enterprise value to free cashflow. You just won't find a metric that'll give you that. And if you plug it into your fancy discounted cash flow model, you're never going to come up with a reasonable price to pay in the stratosphere that exists right now. Now, on the contrary to that is, bear with me, what is MercadoLibre's market cap?

Let me tell you in a sec here. It's okay, 68 billion as of today, May 28th. 68 billion in market cap. In your mind, do you think MercadoLibre could be a $500 billion company? Absolutely. Yes. If you have a long enough time horizon. Yes, exactly. And thinking about Amazon is just so easy to make some comparison here about 15 years ago. And Amazon never really looked cheap and people have to

kind of remind themselves of that if the company has such a big runway I mean valuation is important but valuation probably has less of a bearing on it the longer you kind of look into the future right like if you look out 15 years 20 years years in the future, we're probably going to be, you know, talking here with some white hair and we'll be saying, hey, we should have bought MercadoLibre all those years back then because now it's worth half a trillion dollars or potentially more. Yeah, it's a great point. I mean, if you were to look Amazon during its historic rise, I'm in, I'm in the camp, man, I'm in the camp of,

you know, Graham and Buffett don't overpay for this stuff. But if the opportunity is so massive, it's like, what, what metric will get you there? And it just doesn't exist. And here, I'm not trying to be like some late cycle bull market,

you know, I'll pay anything for this. I'm really not there. I can't get there. I hope I don't ever get there. But at $68 billion in market cap, MercadoLibre feels like a steal. And I don't own own it but it's like no it's number uno dose in my like watch list yeah it's hard i'm using some spanish i'm using

some spanish because it's a spanish business oh it's a lot it's not just showing off your latin american but yeah my spanish is horrible i'm trying to get better. Which leads me into my next point for this pitch. For my Spanish-speaking fans of the Canadian Investor Podcast, bear with me here. I'm really trying. This is a Latin American business, so I'll get into the history and everything. But I think the discussion we're having right now, Simon,

is incredibly important. We could have a whole discussion about this in terms of valuation. Like the opportunity feels so massive, but you'll never get there on an enterprise value to free cashflow metric ever. You just won't get there. No, exactly. Okay.

So Mercado Libre, this is a post for members on Stratosphere. It's called Building an E-Commerce Empire. So Mercado Libre is an e-commerce and fintech platform in Latin America. They serve over 18 countries and they provide commerce tools, payment tools, and they help all over the Latin American region. And their main goal is to democratize commerce across the region through their payment platform and e-commerce platform. So to help visualize what this business does is think of Amazon, Shopify, and PayPal together. And I know that sounds ridiculous. I know it sounds ridiculous because it's like, how can they be all good at all those things?

Well, they are. They really are. So they divide their business into e-commerce and fintech. And there are several divisions within those. So I'll get into that right now. So there's six different business units operating under the reporting structures of e-commerce and FinTech. Okay. So Mercado Marketplace is a platform where users buy and sell products. It's like a two-sided marketplace for e-commerce. Okay. Mercado Sh shops is like a platform for you to build an online store so think of like shopify mercato envios is a shipping service so think of also like shopify having that logistics platform built into it to help you buy and sell products online and then And then Mercado Clicks is an advertising business for Mercado Libre sites. Fintech, Mercado Pago. It's a payment system.

It's person-to-person payments. It's business-to-business payments. And they simplify payments across the internet in Latin America. And Mercado Credito, which provides credit line for business. So this is like secular trends on crack, you know, like that's what this business is. So I think it's an interesting opportunity. Anyway, so Mercado Libre in Espanol means free market. So the founder in 1999, he actually went to Stanford. He's an Argentine from Buenos Aires, Argentina, and he started Mercado Libre Marketplace. It was an auction

type platform similar to eBay. It had some awesome success in Argentina. They went into other countries. They went into Brazil, which by the way, Brazil is their largest market today. It's almost about 50% of revenue, which is quite a lot. eBay actually bought, in 2001, they bought 20% of Mercado Marketplace. Yeah, I'm pretty sure they sold off their stake, though. Yeah, they did. They're great at selling off-grade though. Yeah, yeah, they did. They're great at selling off great businesses.

That's just an eBay thing. eBay is like, their track record, how much would this company be worth? A lot, but they sold off PayPal, right? They did the same thing. If they had their stake in Mercado and they had the stake in PayPal, it would be like a $500 billion business, which is mental to think about. Anyway, so MercadoLibre took the continent and Central America, South America, Central America, Latin America by storm.

Okay, so in 2007, they introduced MercadoPago, which is think of like PayPal. In 2007, they introduced Mercado Pago, which is think of like PayPal. And the growth on Mercado Pago has been mental, like exponential payment volume. They're moving through the platform and it's become a significant amount of total revenue. And they have like a point of sale platform as well, like a square. And it's been really, really effective. So between e-commerce and FinTech, revenues are just explosive. Like, I'm okay with paying high multiples if this growth is, you know, there. And the growth is really there, man. Like the growth is insane. And it still feels early days. So that's just my opinion.

You have 133 monthly active users on the platform, 133 million. And it really is a play on optionality. They have so much optionality because like these tech companies, they can introduce new things like the logistics platform, like the payments platform, and serve it up to their existing customers. And just, it's all gravy. Like it's the optionality and the dominance that they have in Latin America is really, really solid. Their Mercado Envios, which is their logistics business, has nearly 80% of network penetration on e-commerce in Latin America, which is wild to think about.

So you might be thinking, like, are they spread too thin? You know, they have all these secular trends working for them, and they're gaining a lot of market share in all for them, and they're gaining a lot of market share in all of them. And they're the leader, most of them. So how do they focus on all of them and do all of them well? That's a question I ask myself all the time. But the execution kind of shuts that risk down. I mean, the execution just speaks for itself across all of these different verticals that they're going into. So, I mean, is the focus spread too thin? I don't know. The data says no. Okay, well, let's talk about the geographical climate. You were talking about

geographical climate. You were talking about sovereign debt. Argentina's currency has been shaky. How do I word it? That's volatile, to say the least, I would say. It's Argentina. I mean, unfortunately, you can pay me to own their debt. Yeah, and that's probably the biggest risk with them. I would say it's the political climate in a lot of countries they do business in. And obviously, currency as well. It's not even really so like the political climate. It's more so just like the economic climate inside of these countries. It varies. I mean,

they're, they serve up their, their platforms in 18 different countries. Some of them are rock solid. Some of them not, but there are, there are U S listed business and they report in like, there's all kinds of currency adjustments they have to do.

And that might be the biggest risk. Because, you know, if there's so much currency risk, how much are they making in USD? And that's all I really care about. If their payments platform and their e-commerce platform is dominating, but if you look at a chart of USD and it's just flatline because the currency keeps devaluing. That's risky, man. And it's something you got to consider. So now that we got that out of the way, their foothold in e-commerce and payments in Latin America, they're leading with this marketplace, the platform logistics, the software subscription for the shops business, Mercado Pago is becoming such a big part of society. They're building this insane moat across all these high growth secular trends in Latin America. And by the way, fun fact, Latin America is the fastest growing geographically in all of e-commerce.

geographically in all of e-commerce. They had 32% year-over-year growth in 2020 for e-commerce. I think North America was 28% according to eMarketer. So they're the fastest growing, which is kind of nuts to think about. So this business is in all the right places. They're executing well. The growth is mental. And I'm really thinking about entering position. What are you thinking, Simon?

Buying one share? Yeah, buying one. I don't know what it trades for, but. $1,400 or close to that, US? $1,363, I think, right now. Yeah. Is that in pesos? No, it's in dollars.

No, no, it's good old greenback. Greenback. Yeah, so that's how I'm feeling on Mercado. No, well put. Yeah, definitely well put. There's a lot going on. There's a lot going on in this business. A lot of upside.

I totally agree with you on that. But there are some risks with every business. There are risks, and I think you outlined those well. For people looking to invest in them, don't be surprised if you listen to calls or you look at annual reports, and like Brayden said, you see some pretty wild currency fluctuations because it's the name of the game for them. They have all their revenues in other currencies currencies and then they report in usd so um and they they usually talk about it when they release their statements so um i mean how can you not yeah yeah i mean how can you not and if you own this business and you're not thinking about that then i'd be worried so um but all given, I think that we've had an interesting conversation at the beginning about this too, about how do you get there on price?

And I can find things that are trading at similar multiples that have one-fifth of the growth. So Mercado, like Melly looks so cheap when you think about it. One comes to mind. I think it's called uh you know phase drive hey i think i don't even i'm following it i hope it's zero uh it's not i just said it was it was too easy just to to talk about it you gotta dunk on it now to serious business okay serious business it's the end of it's the we're done our episode but uh this is this is serious

business simon what's going on tell me okay well there was a great uh great hockey game last We're done our episode, but this is serious business, Simon. What's going on? Tell me. Okay, well, there was a great hockey game last night. Unfortunately, your prediction of a Toronto in five did not come true. We're going to a game six. There's fans. There's going to be fans at the Bell Centre. Yeah, I was going to say, regardless who you're a fan of, whether your team is out, whether you hate hockey, whatever whatever it is i think it's just something to tune in even if you tune in for just 10 minutes

just to see people in the stands in canada i believe it's the first time for all sports that there's actually fans for a game um they're going to have i think it's 12 or 15% capacity, but 2,500 people. It's going to be rocking still, though. Those 15% are going to sound like 75%. They're going to be so fired up. I was listening to a sports show from Montreal this morning. They said a guy called in. He's a season ticket holder, got himself some tickets,

and I think he paid like $ bucks for them each ticket pretty good tickets I think and if he were to sell them he would get 3,500 to 4,000 per ticket whoa yeah it's I think I don't know I don't know if it's all the Toronto money trying to get those tickets it could be it's both man it's they're both big markets they're both big markets and i think it just shows that people have money um you know to spend people just want to get out they want to return to normal and that's probably the biggest thing for me is just you know it's a light at the end it's probably sentimental value too right yeah like you can tell your grandkids you were at the first hockey game back. From the pandemic.

Yeah, exactly. So I'm excited to watch it. I'm still hanging on to my prediction of Montreal in seven. Montreal in seven? Yeah, I did put $100 on the series when it started. I was getting, I think, 3.7 to one. So it wasn't looking good last game. But now I'm, you know, there's a little hope.

But I think it's a fun game if both teams play like last night whoever wins i think it'll be uh just just an entertaining game uh to watch because there's uh toronto has a lot of skilled players but you know montreal has some kids that are pretty talented too some of those kids are buzzing out there on montreal i really like the way Suzuki plays. Yeah, yeah. I really do. All of them were saying before this, before we started recording, they're all like a bunch of small guys who have a ton of skill and are absolute grinders in the corners, like Gallagher, Katkenyemi.

I don't know if I'm saying his name wrong. I'm sure. Katkenyemi, yeah. Katkenyemi and Suzuki and more, Kenyemi and, um, and Suzuki and, and more like the whole, yeah. Call it call field. Like those guys are,

those guys are buzzing out there, but, uh, I guess, I guess Leafs in six now, I guess. Well, yeah.

And I'm just going to say one more thing on that is, uh, can you imagine if the Leafs lose Saturday? Oh, like people will just be freaking out in Toronto. I won't be able to sleep until game seven. It's just endless amounts of disappointment. What is this?

Marner and Matthews fifth playoff series together. Yeah. And going back to, was it the series they lost against Boston one day up, like three, one several years ago. And then they yeah completely lost it gardner jake gardner puked up the puck in the top of the circle just giving it to brad

marchand and uh david pasternak right in their office over and over again yeah but anyways it'll be it'll be a fun game uh hopefully uh hopefully the habs win but uh whatever happens just fun seeing people in the stands alright before this podcast turns into the Canadian spitting chiclets which I think we'd be terrible at that

we would be just terrible let's stay in our lane thanks for listening guys if you go to getstockmarket.com I'm'm pumping out content, baby. I'm talking tons of content. We're doing two, three reports, four write-ups a week.

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we'll see you guys next week. Take care. Bye-bye. The Canadian investor is not to be taken as investment advice. Braden or Simone may own securities mentioned on this podcast. Always make sure to do your own research and due diligence before making investment decisions.