Prof G Markets: Alibaba and Mercado Libre, Share Buybacks vs. Dividends, and National Credit Ratings

Market Dynamics

Scott Galloway highlights the unique market dynamics that shape the success of Alibaba and Mercado Libre. He notes that despite political uncertainties, these companies have shown remarkable growth. For instance, Mercado Libre's revenue grew 78% in 2021 and 50% in 2022, showcasing its resilience and strong market position 1. Scott also points out that Alibaba's valuation remains attractive despite the Chinese government's heavy-handed approach 2.

Mercado Libre is probably the most impressive company in Latin America. It's really well run. Their operating margins increased from 3% in 2020 to 10% in 2022.

--- Scott Galloway

These insights underscore the importance of understanding regional market dynamics when evaluating investment opportunities.

   

Government Risks

Scott also delves into the government risks that Alibaba and Mercado Libre face. He explains that Alibaba's low valuation is partly due to the Chinese government's unpredictable regulatory actions. Similarly, Mercado Libre operates in Argentina, a country with a history of government corruption and economic instability 3.

The play was to buy Alibaba in November when it was trading at seven or eight times EBITDA. People thought the CCP had decided that capitalism and their thoroughbreds are essential.

--- Scott Galloway

Scott emphasizes that investors must consider these political risks when assessing the potential of these e-commerce giants.