With the economies of Brazil and Mexico growing at solid rates and likely to continue doing so for some time, there are a sizeable number of high-quality Latin American stocks to buy now. Moreover, both economies are rapidly becoming more technologically advanced in general and adopting fintech in particular.
Economists, on average, expect Brazil’s economy to increase at a 2% rate above inflation in 2024 and 2025, while the government is calling for a 2.5% real expansion this year and a real gain of 2.6% in 2025. Also importantly, the South American country’s labor market is rather strong, so its consumers have relatively large amounts of money to spend.
Similarly, the well-respected U.S. consulting firm, Deloitte, estimated in May that Mexico would generate solid real economic growth of 2.2% and then expand at an average rate of 2,1% between 2025 and 2030. Over the longer term, the Mexican economy, in a trend called nearshoring, can entice many companies that are closing their factories in China to build new plants in Mexico. Here are the three top Latin American stocks to buy now.
The three largest markets of Latin American fintech and e-commerce giant MercadoLibre (NYSE:MELI) are Brazil, Mexico, and Argentina. The firm is a leading company in both its main sectors in Latin America and broadband penetration in the region is still growing quickly.
Given these points, it’s not surprising that MercadoLibre is expanding quite rapidly. In the first quarter, for example, its revenue, excluding currency fluctuations, soared 94% versus the same period a year earlier to $4.3 billion while its net income jumped 71% year-over-year to $344 million. Also impressively, the monthly active users of its fintech business climbed 38% YOY to 48 million, while the unit’s assets under management jumped 90% YOY, with AUM more than doubling YOY in Brazil. Indeed, the company noted that its fintech business had generally performed particularly well in Brazil.
In a note to investors on May 20, investment bank Jefferies started coverage of MELI stock with a buy rating. Estimating that MercadoLibre “has less than 1% share of consumer loans and credit card balances,” the bank believes that the firm’s fintech business can still grow a great deal going forward. It placed a $2,100 price target on the shares.
Given the firm’s huge growth and vast potential, I view it as one of the best Latin American stocks to buy.
Nu Holdings (NU)
Nubank mobile app on white cell phone and credit card on black surface. NU stock.
Source: Lais Monteiro / Shutterstock
Like MercadoLibre, the Brazilian fintech business of Brazil-based digital bank Nu Holdings (NYSE:NU) is growing explosively. As a result, in Q1, its top line jumped 67% versus the same period a year earlier to $2.7 billion. Moreover, its net income, excluding certain items, came in at $443 million, up from $396 million in Q1 of 2023. In Q1 alone, the firm added 5.5 million net new customers.
Also boding very well for NU stock, two major investors bought significant amounts of the fintech firm’s shares last quarter. Specifically, the huge Japanese investment bank, Softbank, added 2.3 million shares of the name, increasing its total holding to 23.3 million units. Saudi Arabia also bought 1.18 million shares of NU stock last quarter. Moreover, as of the end of Q1, Warren Buffett owned $1.3 billion of the shares. These large investors’ purchases of NU stock make it one of the best Latin American stocks to buy.
Grupo Aeroportuario (NYSE:ASR) owns airports in Mexico, Columbia, and the U.S. Last quarter, the firm’s EBITDA jumped 18% versus the same period a year earlier to 4.9 billion pesos, while its bottom line soared 50% to 3.8 billion pesos. Moreover, the revenue of its Mexican operations jumped 19.5% year-over-year to $5.4 billion.
The company was able to raise its prices by about 25% last year, but I believe that it is also likely benefiting from the nearshoring trend which is starting to materialize in the Latin American country. Additionally, Grupo Aeroportuario built 45 new commercial establishments in its airports in the last year, of which 17 were in Mexico. Also importantly, its average commercial revenue per passenger jumped 9% YOY in Mexico, likely reflecting the expanding Mexican economy and the onshoring trend. After all, senior employees of foreign firms looking to open factories in Mexico probably visit the country fairly frequently, and they are likely to spend significantly more money at airports than tourists or domestic travelers.
ASR stock has a low forward price-to-earnings ratio of 13.9x and a very attractive forward Enterprise Value/EBITDA ratio of 8.6 times.
In light of ASR’s strong, positive catalysts and low valuation, think that it is one of the best Latin American stocks to buy.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.