I'm a firm believer that patience is the individual investor's best friend, but this largely positive trait can at times be treacherous.
Case in point: Latin American e-commerce powerhouse MercadoLibre will likely go down as my "one that got away" investment in 2014. Rarely a bargain, this high-growth stock had sagged significantly by midyear, which piqued my interest in shares as a possible addition to my personal portfolio.
However, MercadoLibre stock rallied nearly 60% in the past sixmonths. So did I miss the boat when it comes to MercadoLibre, or is there still time for long-term investors to snap up shares of this burgeoning e-commerce leader?
Inside MercadoLibre's up-and-down year Exactly one year isn't the most optimal time frame to tell this particular story, because to me MercadoLibre's recent there-and-back-again story is more appropriately told over the past 14 months. Check out the chart below, and I think you'll understand why.
From October 2013 to May of this year, MercadoLibre stock crumbled from nearly $145 to just under $80 at its 52-week low. What caused this precipitous drop, and how likely is it to occur again?
MercadoLibre's early 2014 sell-off largely resulted from turmoil in a few key Latin American currency markets where the company enjoys a significant presence, namely Argentina and especially Venezuela. These currency headwinds siphoned off much of MercadoLibre's impressive growth and obfuscated its compelling long-term business model. See for yourself.
Source: MercadoLibreinvestor relations.
While effects of the currency headwinds persisted in MercadoLibre's third-quarter report, such devaluations should only serve as occasional blips for what is otherwise a compelling growth business. For Foolish investors looking to participate in the ongoing expansion of a business over many years, the above risks represent only a tiny, but significant, blip on the radar of an otherwise appealing company.
Love the business, hate the price For those unfamiliar with the company, MercadoLibre is often called the "eBay of Latin America," and for good reason. Beyond the fact that eBay owns a large minority stake in it, MercadoLibre is at its heart an online auction site akin to its more established North American counterpart.
And like eBay, MercadoLibre enjoys fantastic economics, such as operating margins that routinely sit north of 30%, while remaining very much a high-growth company. It's a one-two combination of growth and profitability that offers investors the kind of tantalizing return potential that is rarely seen on the market. Equally appealing, by some estimates MercadoLibre controls as much as 25% of online retail sales in Latin America. That kind of insulation won't last forever, as both Amazon and eBay are increasingly eyeing the regionfor its growing commercial potential. However, with a significant head start and nearly regionwide brand recognition, MercadoLibre should weather the storm.
Still, in the wake of its recent run-up, tapping into MercadoLibre's likely bright future won't come cheap for investors. The company currently trades at 75 times last 12 months' earnings and 41 times next year's expected earnings. Also, as the sell-off earlier this year demonstrated, the company is no stranger to volatility in both operations and stock price.
A missed opportunity by any other name While I'm kicking myself for missing out on MercadoLibre when the price was low, I'm also not rushing out to snap up its shares before they soar still higher, although I'm confident they will.
As we've seen, patience in investing can prove perilous when one waits too long to buy a stock at an attractive price. On the flip side, patience can also serve as an extremely valuable tool in avoiding costly mistakes. So while I'll be sitting idle for now when it comes to MercadoLibre, I'll jump at the chance to snap up some of its stock should it once again decline.
Here's to hoping patience is indeed a virtue.
The article The 1 Stock I Wish I'd Bought in 2014 originally appeared on Fool.com.
Andrew Tonner owns shares of eBay. The Motley Fool recommends Amazon.com, eBay, and MercadoLibre. The Motley Fool owns shares of Amazon.com, eBay, and MercadoLibre. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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