Case Study: Do Factors That Led to Multi-Bagger in MELI Apply To New Candidate?

As part of our ongoing series on multibagger Case Studies, private investor and GeoInvesting contributor Thomas Birnie was kind enough to offer up his second video explaining more on the dynamics of underlying clues that could lead to significant appreciation in stocks.

In his previous analysis, Thomas examined Netflix’s significant decline around 2011-2012, identifying it as a high-quality company that was temporarily undervalued due to market overreactions. He noted that Netflix maintained strong revenue growth, positive operating income, and a solid balance sheet during this period, with technical indicators suggesting institutional accumulation, which collectively signaled a potential for substantial recovery and growth, which ultimately did occur to the tune of over 6000% in gains.

Building on this framework, Birnie’s latest contribution delves into MercadoLibre (MELI), often referred to as the “Amazon of Latin America.” MELI operates as a leading e-commerce and payments platform across Latin America, providing a marketplace for buying and selling goods and services, as well as offering payment solutions through its MercadoPago system. After its IPO, MELI’s stock price plummeted from $80 to $10 per share, reflecting market uncertainty and broader economic conditions during the 2008-09 financial crisis. However, the company maintained steady revenue growth, positive cash flow, and a solid balance sheet with no net debt. Founder-led management remained focused on long-term growth, executing key acquisitions and initiating share buybacks when valuations were low. Indicators such as institutional accumulation during the price decline suggested underlying confidence in its business model. These conditions, coupled with a drop in valuation multiples to attractive levels, set the stage for a strong recovery. Within a few years, MELI’s stock price increased by 800%, which Thomas believes provides a strong case study in recognizing undervalued growth businesses.

Birnie now identifies a current opportunity that shares many of these characteristics: a sharp post-IPO decline, insider confidence through share buybacks, and fundamentals that suggest potential for long-term growth. This company operates in a high-demand sector, facilitating complex transactions in a way that creates value for large enterprises. Thomas thinks this setup reflects many of the same dynamics that preceded MELI’s success.

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Thomas Birnie Case Study Points To Parallels Between MELI and His New Multibagger Candidate…

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