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Welcome to Long-Term Mindset, the Wednesday newsletter that helps you invest better.

Today's Issue Read Time: <2 minutes

Lesson: Adding to your winners
Timeless Content: Sea Change (again)
Thread: Bezos' Shareholder Letters
Resource: 25 Money Rules
And more!

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Friends,

If you looked across all three of our portfolios, one stock would stand out as our biggest (cumulative) holding: Mercado Libre.

But it's not because we bought the stock hand-over-fist. It's because we've been holding the stock for a long time, and selectively added to it at "better value points."

But what in the world does "better value points" even mean?

Let's use Stoffel's first and last transactions as an example:

On May 21, 2012, he bought shares for $76 per share.
On August 30, 2017, he bought shares for $244 per share.

On the face of it, Stoffel did not buy at a better value point. Shares were three times more expensive.

But Mercado Libre changed a lot over those five years. As of (at the time) the most recent quarter:

E-commerce: The value of everything sold on the site (gross merchandise volume) more than doubled to $2.7 billion.
Fintech: All of the money changing hands via Mercado Pago (total payment volume) increased nearly 10-fold to $3.2 billion.

In other words, Mercado Libre was experiencing a lot more success at democratizing commerce and finance in Latin America. Perhaps most importantly, free cash flow quadrupled.

Think about it: the stock was up 220%, but free cash flow was up even more. Yes, the price per share was more expensive, but relative to the success it was having, Mercado Libre was actually cheaper!

Look at how the price-to-free-cash-flow (P/FCF) ratio changed.

Even though Stoffel was paying a higher price, he was getting more bang for his buck in 2017 than he was in 2012. This reminds us of a Warren Buffett adage:

"Price is what you pay. Value is what you get."

And if you want to experience long-term investing success, this is how you do it. Buy wide moat businesses, and add to them at better value points. It really can be as simple as that.

Wishing you investing success,

Brian Feroldi, Brian Stoffel, & Brian Withers

Long Term Mindset

P.S. Stock Investing Mentor has officially launched! The first live training session is tomorrow (Thur, Sept 4th). Click here to join and save $100 off the annual plan.

One simple graphic

One piece of timeless content

Howard Marks, Co-Chairman of Oaktree Capital, wrote a memo in December 2022 about the sea change he saw in the equity markets. He released a "sequel" memo titled Further Thoughts on Sea Change that covers his perspective on what's happening and what individual investors should do.

One thread

Chris Hladczuk

@chrishlad

I read all 40,000 words from Jeff Bezos' Amazon shareholder letters.
Here are 9 lessons worth your time:

10:34 AM • Mar 27, 2022

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One resource

Feroldi recently was a guest on Chris Hutchins' "All the Hacks" podcast. Feroldi discussed 25 Money Rules (and When to Break Them), including the 15% rule, the rule of 72, the 50-30-20 Rule, and more!

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