There aren’t a lot of areas driving investor optimism right now with every week offering a new edition of Fed Watch, but look abroad and investors can find some notable opportunities. Latin America in particular may see an e-commerce bright spot in 2023, with online shopping giant MercadoLibre (MELI) accessible in an e-commerce ETF like the ARK Fintech Innovation ETF (ARKF).
Regional online retail sales in Latin America are set to reach $160 billion by 2025, up from $85 billion in 2021 according to Statista, with Argentine e-commerce growing 73% year over year in the first half of 2022 according to a local e-commerce chamber. MELI itself invested $1.45 billion in Mexico for logistics infrastructure like warehouses and distribution centers.
What’s more, MELI is seeing expanding margins for Mercado Pago, its online payment platform that has now reached sufficient scale to have operating leverage, per the firm’s CFO. MELI is up 20.5% over the last five days, and up 10% on Thursday. Retail sales meanwhile are expected to double this year in Latin America overall.
ARKF’s 6% weight towards MELI is the third largest among all ETFs according to VettaFi, with the stock the fourth-largest weight within the e-commerce ETF. ARKF is actively managed and charges a 75 basis point fee for its exposures, investing in fintech-winning themes like blockchain, transaction innovation, and customer platforms. The strategy has outperformed both its ETF Database Category Average and its Factset Segment Average on a YTD basis, returning 8.6%.
ARKF holds other e-commerce firms in its portfolio as well, with Shopify (SHOP) and Block (SQ) the top two highest-weighted holdings in the strategy at 11.7% and 11.6% respectively.
While the strategy didn’t have the easiest of times last year as certain fintech segments struggled, it may be well positioned in the new year thanks to its exposure to MELI among other e-commerce shops. U.S. equities may be facing a Fed-induced recession on the horizon, but there is cause for optimism should MELI ride a growing e-commerce trend in Latin America.
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