Transcription
Hello everyone, and welcome back to another video. In today's video, we are going to be discussing why I have continued to buy more Brookfield Corporation despite the stock selling right near all-time highs. We'll also cover an interview that Howard Marks did a couple of days ago where he updated his thoughts on if the market is starting to turn into a bubble, and why I am continuing to buy more Mercado Libre stock as well. So, this is going to be another action-packed video.
But before we get into the video, I want to let you all know that I am doing another 1-hour live stream with TD Bank, which is one of Canada's largest banks, where I will be discussing my entire investment process and how I pick winning stocks. This live stream is going to be on October 22nd at 2:00 p.m. Eastern. I have the live stream actually live on my channel right now if you want to go and get notified when it actually starts. But this is going to be a great conversation that's going to dive into my investment strategy and what I look for in a stock. So, make sure you tune in to that live stream again on October 22nd at 2:00 p.m. Eastern.
But with that being said, let's now dive into today's video and let's start off by discussing Brookfield Corporation, the recent news with this stock, and why I am continuing to buy it.
All right, so the first major piece of news is that Brookfield and Bloom Energy announced a $5 billion strategic AI infrastructure partnership. The highlights from this announcement read, "5 billion partnership launches first phase of joint AI infrastructure vision. Bloom Energy to become preferred on-site power provider for Brookfield's global AI factories. The partnership marks Brookfield's first investment through its dedicated AI infrastructure strategy. AI factories require infrastructure that tightly integrates compute, power, data center architecture, and capital. Bloom Energy's fuel cells deliver reliable, scalable, and clean on-site power that can be rapidly deployed without legacy grids. Brookfield brings world-class expertise in infrastructure development and financing. Together, the two companies are redefining how AI factories are built and powered. Unlike traditional factories, AI factories demand massive power, rapid deployment, and real-time load responsiveness that legacy grids cannot support."
So, to put it simply, Brookfield is partnering with Bloom Energy, and this partnership will help the AI factories that Brookfield wants to build generate their own power and not rely on the grid. This is important because traditional grid connections and upgrades can take years, and Bloom's fuel cells can be deployed within 90 days and provide on-site power. This will help Brookfield bypass the grid altogether and rapidly build the power that's needed for its AI factories.
Now, after this announcement, my question was, why aren't more companies and data centers using Bloom's fuel cell technologies then? And here's what I found. Fuel cell systems are complex and have a high initial cost compared to conventional power sources or even simple diesel generators. At the same time, Bloom's fuel cells compete with other renewable energy sources like solar and battery storage, which are getting cheaper and cheaper and are actually cheaper than Bloom's fuel cells today. So basically, Bloom's fuel cells have a higher initial capital cost, and they're competing with cheaper renewable energy sources like solar and battery storage. However, the benefit to the fuel cell technology is that it is much more reliable than solar and other renewable energy sources. So, I imagine that Brookfield will have a combination of renewable energy and fuel cells powering the AI factories. Additionally, Brookfield owns and operates natural gas pipelines and storage facilities, which creates a natural synergy, as Brookfield can supply its own natural gas to Bloom's fuel cells, which could create a competitive advantage through higher profit margins.
This brings me to another question that I've been asked about Brookfield data centers, though. I received a lot of questions on my last video about Brookfield building data centers because I took a pretty bearish stance on companies like Iron and Coreweave because the business of owning and operating data centers is extremely capital intensive and doesn't seem to have any true remotes or profit margins. So the question is, Brookfield is wanting to deploy $200 billion of capital to build AI factories, which are similar to data centers. So, am I not concerned about Brookfield doing this? And to put it simply, my answer is no. And here's why. The distinction between Brookfield's AI factories and the data centers built by companies like Iron, Coreweave, and NBIS primarily lies in scale, vertical integration with power, and the intended customer service model. The key difference is the planned integration of energy and data solutions. As a major owner of power and infrastructure assets globally, Brookfield can essentially build the entire factory, the data center, and the dedicated large-scale and often renewable power generation needed to run it all in one integrated strategy. This is what makes it an AI factory rather than just a data center. Brookfield is positioning itself as the body of AI infrastructure and leveraging its ability to build, operate, and wholly own the fuel, power, real estate, and compute. This should allow Brookfield to see increased margins and a competitive advantage.
This next screenshot comes from Brookfield's second quarter 2025 letter to shareholders, which was its most recent one. And here this says, "We are one of the largest operators and developers of traditional utility-scale renewables and distributed generation, have a leading nuclear power business in Westinghouse, and are the largest private operator of hydro facilities in the U.S. All of which can help provide scale-based load energy to the grid. The combination of our global scale, significant access to capital, and these combined operating and development capabilities allow us to deliver solutions to our customers few others can. Our differentiated offering is deepening our relationships with the largest and fastest-growing institutions globally that are driving the surge in demand for power and should help us generate significant value for our shareholders over the long term."
In this letter, Brookfield is saying that they are one of the largest builders and owners of utility at scale across the United States and across the world. They also currently have $150 billion of capital that they still need to deploy. So basically, Brookfield has the capital ready to go, and they are one of the best-positioned companies in the world, at least in my opinion, to build out the energy infrastructure that is needed to power the new AI data centers. And they want to own everything from the energy that powers the data center to the actual real estate, the data center, and all of the compute. So having this massive vertical integration at scale should give them a large competitive advantage over pretty much every other data center company in the world.
This is also an important distinction and competitive advantage because power is going to become the limiting factor for AI development, and it arguably already is.
This next screenshot comes from an interview with a Google employee who is working on data centers. And here they say, "The longest pull on the tent to get a data center built is power. Just lack of power. The supply chain has been largely solved. The contracting issue we can really solve for. The permitting issue we can solve for. Power, lack of available power, reliable power has become the biggest bottleneck for us. Utilities, they were not really ready for this because they're upgrading. They're bringing on the sensitivity for gigawatts or something like that. Power is by far the biggest determinant. Once you solve for power, then there's pretty much a standard data center built after that. It's permitting. Permitting is not really a big bottleneck. Supply chain GPUs, which we all want to get GPUs and TPUs. We have our own internal TPUs, but the GPUs from Nvidia, either we buy them or we can rent them from someone like Coreweave or something like that. That's not really a constraint."
So this employee is quite clearly saying that power is becoming the main bottleneck for AI development and building more data centers and getting more compute. Now, it's not getting more GPUs or even access to GPUs. It's getting literal power to build more data centers. And I think that this is going to become more of the story over the next couple of years.
Another article that I found says, "The AI boom meets the power grid. AI's next bottleneck is cheap electricity." Further down in this article, it says, "We've spent several years now obsessing over models and assistance. But here's a new interesting truth. The next competitive edge in AI won't be another benchmark, but electrons. And not just any electrons, cheap ones. As the AI wars heat up, the winners won't simply be those with the best user experience or the most compute. They'll be the firms that can secure abundant low-cost power at scale, hour after hour, year after year. That's where AI is colliding with the physical world. And here's where the story stops being about software and starts being about the grids, turbines, and price curves." Most recent analysis shows that AI-driven data centers are now a visible driver of electricity demand and are starting to send retail prices higher. A clear signal that the constraint is shifting from GPUs to kilowatt hours.
So this article is saying that the next competitive advantage that businesses will have is securing low-cost power, and the winners will be the companies that can secure reliable low-cost power at scale. This is because data centers are increasing electricity demand on the grid and sending electricity prices higher for consumers. And in my opinion, this could start to become a social and political issue if it continues, as consumers are starting to pay higher prices because of all of the data center and AI demand. This means that being able to build more power and get access to electricity is going to become increasingly important. And Brookfield, in my opinion, is one of the best-positioned companies in the world to take advantage of this opportunity.
Brookfield is also expecting to grow its profits at a 25% compounded annual growth rate over the next 5 years. And it's currently only trading for about 20 times profits today. And a 20 times multiple for 25% annual projected growth, in my opinion, is a very attractive price. So I think that Brookfield is overlooked in the market right now. And I don't think that people have really caught on that this company is actually one of the best-positioned companies in the world to benefit from the buildout of data centers. And I think that they have a massive competitive advantage because they can essentially build their own power generation and get access to extremely cheap power. And that is where the competitive advantage lies and why I think that Brookfield is better positioned than a company like Iron or Coreweave.
Now, another major piece of news that came out with Brookfield recently was that they acquired the remaining interest in Oak Tree. Here, this says, "Brookfield will acquire the approximately 26% interest in Oak Tree that it does not already own. Brookfield will own 100% of Oak Tree, one of the world's premier credit managers, further strengthening Brookfield's market-leading and broad-based credit platform." Bruce Flat, the CEO of Brookfield, then said, "When we partnered with Oak Tree six years ago, we joined forces with one of the world's most respected credit investors, and the results have surpassed our expectations." Howard Marks, co-chairman of Oak Tree, then stated, "Our partnership with Brookfield has been a great success built on shared values of disciplined investing, long-term thinking, and integrity. Oak Tree will remain central to Brookfield's credit strategy, and we see significant opportunities to grow the franchise and expand what we can offer our clients together."
Now, in my opinion, this is a massive development for Brookfield because Oak Tree is considered one of the best credit investors in the world, and Howard Marks is the founder of Oak Tree and a co-CEO. Howard Marks is considered a legendary investor. So the fact that Brookfield now essentially owns Howard Marks and his business entirely, I think that it is just extremely bullish for Brookfield altogether. And Howard Marks sits on the board of Brookfield Corporation now, and he is significantly invested in the success of Brookfield going forward. So you can bet that Howard Marks is going to remain invested in Brookfield, and he's going to help steer the ship forward and also make sure that they are doing disciplined investing across the board.
Now that we're on the discussion of Oak Tree and Howard Marks, let's move on to the interview that Howard Marks did a couple of days ago where he discussed his views on the market and if we are starting to enter a bubble. I thought that this was a very insightful interview. So I want to play it, and we will discuss it as we watch. So let's hop right into it.
"So a lot of people look at the the moment that we are in right now and they see very high valuations and I don't know how you would deem sentiment but there's certainly a lot of enthusiasm around technology like AI. >> Are we in that moment? >> There's enthusiasm. There are high valuations. I I don't know enough about tech stocks or stocks in general or AI specifically to know whether the valuations are excessive. My response to date has been that the valuations are not crazy. High but not crazy. And when when things are either high or low but not crazy, you can't make an observation that has a high likelihood of being correct. And um, you know, this may prove to have been a time when you should have uh become defensive. Um, and people will look back and say, 'Well, well, why didn't you?' But I don't think you can say that dependably right now. Expensive uh and going down tomorrow are not synonymous. And uh I wrote a memo celebrating the 25th anniversary of of that first memo, bubble.com, that got attention. I wrote a a memo called on bubble watch and I said that to me the main ingredient in bubbles is uh psychological excess. There's no such thing as a price too high and I don't detect that level of of uh mania at this time. So I have not uh put the bubble uh label. >> Right. >> Okay."
So, what Howard Marks is saying here is that he thinks the market is expensive, but it's not high enough to be considered a bubble. And it's also interesting because he's saying that for a bubble to happen, you actually have to have this sort of euphoric mania going on where people think no price is too high to pay for the S&P 500 and we should just be piling in. Don't even think about price. Price doesn't matter because everything is going to continue going up extremely rapidly. And another important thing he said is that things can be expensive, but that doesn't mean they have to go down. And this is something that I see online all the freaking time. For example, I'll go on X and I'll say, "Hey, I think that this stock is looking quite expensive, pretty risky." And then people are like, "Well, then why don't you short it?" You you have to understand that something can be expensive, and that doesn't mean that you have to take a short position or that it cannot continue to go up or that it has to go down tomorrow. Things can be expensive, and they can continue to get even more expensive. So that doesn't mean that we need to be so for me, that means that I do not need to be selling my stocks today or, you know, taking a short position on the market or whatever. It just means that I have to recognize that the market is on the more expensive end.
And I have some screenshots that help represent that the market is definitely expensive today. So here we can see that the price-to-earnings ratio is sitting at 31.2 now, which is clearly extremely high versus the S&P's history. At the peak of the dot bubble, the trailing 12-month price-to-earnings ratio got to about 34. So if the market rips another 10% rapidly, then the PE will be in line with the dot bubble. This next chart is the S&P 500's forward price-to-earnings ratio. And we can see that it is sitting at about 24, well, it was as of September 30th, which is clearly high. Now, during the dot-com bubble, it did get up to about 25. So, once again, if we rip another 10% rapidly, then even the forward PE will get back to dot-com bubble levels. We're not quite there yet, but it is definitely getting expensive, and I think there's pretty much no argument that the market is looking on the expensive end.
This next screenshot is the one that I find the most interesting, which is the five-year returns historically when the market was as expensive as it is today. And we can see that the 5-year returns based on historical data are 0% now. And this is how the market works. As price multiples expand and things get more expensive, future returns get lower. And I think that people should just be expecting future returns from here to get lower over the next fiveish years because the historical data backs that up. And it's just how price multiples work. When you buy things for a higher price multiple, you should be expecting your future returns to get lower. So I personally am not expecting the S&P 500 to produce 10, 15, 20% annual returns from its current price. Also, because a large portion of the recent returns that we have seen from the S&P 500 were due to multiple expansion, and multiples cannot expand forever.
So I do agree with Howard Marks that the market is looking expensive right now, but he says that he does not think that we are necessarily in a bubble because we're not in this euphoric mania where no price is too high to pay for stocks as a whole. But let's continue on with the interview.
">> on this on this incident >> because some people are wondering if there are echoes back to the dotcom bubble with AI >> transformational technology >> by all the the chip stocks that are playing into it. >> Right. Right. Well, uh I think there's relatively little doubt that AI will change the world and AI has been successful as an investment and people are piling in and there's some fear about being left out. Um, but to me it just hasn't this is a judgment call and to me it just hasn't reached that critical mass of mania. Value is another theme. You just wrote about value in your recent >> August piece. Do do value investors >> are they missing something? >> A lot of it came down to whether you're talking about a value with a small V or a big V. Value investing with the big V is kind of a shall we say a sect. Mhm. >> Uh, and it has hard and fast rules and it's firmly delineated and we do this but we don't do that. And I think that the key to excellence in investing is open-mindedness. Uh, so uh, that's probably not a good approach. On the other hand, you should stick to your last and the things you're good at. But I think that value investing with a small V, which means trying to figure out what something is intrinsically worth and seeing if you can buy that at a reasonable price. I think that makes a lot of sense >> right now, even in today's environment. Um, it it's tough because uh, you know, uh a conjectural field like AI, you probably can't reduce an AI company's potential over the next 30 years to a discounted present value today and try to buy it at that or less. Um, so when you get into the new new thing, which uh uh where sometimes big money is made, it's it's harder to do that on a value basis, especially for startups or companies that are that are uh early in their life cycle. Um, but you know, the the connotation of uh hard value investing has been comp proaic companies that have existed for a long time that are not really on a growth curve but rather are quite stable but have repeatable uh cash flows and earnings and so forth. Uh, that's kind of the extreme of value investing with a capital V and that may be too restrictive. Uh, so uh, I think something in between. I think >> this is this is very interesting to me because I think people view me as the big V value investor and what Howard Marks is saying here is that there's actually two types of value investing, which I agree with the sentiment, but I don't agree with in reality. So the big V value investing is your typical value investor. You know, people think these guys are out there buying stocks below book value or you can only buy stocks with low price-earnings ratios. And Howard Marks is saying that's a sect. A sect is basically a religious belief. So these guys are like religious value investors. That's their own group. But what's interesting is true value investing, which is what I have studied from Warren Buffett, Peter Lynch, and Charlie Munger, is it includes growth investing. Charlie Munger actually says that all investing is value investing. Because what you're doing in value investing is you're trying to buy an asset, a business, a stock for below or at least for fair value. No matter what it is, it could be a bank or it could be Mercado Libre, which is a growth company. And when you study the Berkshire Hathaway letter to shareholders, which are written by Warren Buffett, there's periods where he says, you know, we're buying this company at what seems to be a high multiple because we're investing capital into its future growth. But that is increasing its intrinsic value because what intrinsic value is is the profit potential of the business as well as its future profit potential. So what Buffett has actually done, he did this with Geico, is he was running Geico at a loss for a bit. He acquired Geico and Berkshire, and then he was plowing, I believe it was about a billion dollars a year into marketing. I I don't know if that's the exact metric. It's in the Berkshire letters, but he was plowing at least hundreds of millions of dollars into marketing Geico because it was causing Geico to grow quickly and it was causing Geico's future earnings potential, its future profit potential to grow significantly. So even though he was running the company at a loss today, its future profit potential was growing significantly, and that was increasing its intrinsic value. But if you were an outside investor looking at Geico at that time, you would have seen an unprofitable business with probably a price-to-book ratio well above one and a price-to-earnings ratio that was negative because the company was running at a loss. So what true value investing is is thinking about the profit potential of the business, how much cash it could return to you if it were not investing in growth, and additionally what you believe the profit potential of that company will be over the long term. So, we're going to be talking about Mercado Libre here in a minute and why I continue to buy it. But when you look at Mercado Libre, you're going to see a company with a very high price-to-earnings ratio, very high price to operating income, and those metrics are very low for the business because they're investing so much money into marketing and into growth. So when I'm looking at a business like that, what I try to do is figure out how much cash could the business generate for me today if it were not investing so much into growth, and also what do I think the profit potential of the business is going to look like over the long term as it is investing into growth. That's what Howard Marks is saying here as well, is as an investor, you you do not want to bucket yourself with the big Value investors where they restrict themselves to only looking for low price-to-earnings ratios, only looking to low price-to-book ratios, and staying so close-minded in that framework of valuation. Because if you stay in that that framework, that mental framework, you're essentially going to be looking at only low-quality businesses, because typically it's low-quality businesses that do not have high growth prospects that trade for those super low multiples. That's my opinion after everything I have learned from Buffett and Munger and whatnot. I've really learned that growth investing and value investing are the exact same thing. You just want to make sure that you're not paying exuberant prices for high-quality businesses.
Now the second point that Howard Marks is making here is that it is challenging to run a typical DCF or know the intrinsic value of an AI startup, and it all goes back to what actually creates intrinsic value and shareholder value over the long term. And what that is is the profits of the business. So, it's extremely hard to value a brand new company where you don't know if it's even going to be alive in 10 years down the road or if the company has a competitive advantage or if it or if it is even close to producing profits today in a brand new industry, it's extremely hard to know what the profit potential of that business is going to look like with any form of certainty or accuracy 10 years out into the future. And therefore, while these companies may go on to become massive winners in the future, you know, producing tens of billions of dollars in cash flow over the next decade, right now that that certainty is foggy. It's extremely unclear. So those types of investments in my opinion would be bucketed into the more speculative category. It doesn't mean that, you know, someone like me should not be buying them. It just means that I should understand that they are more risky, they are more speculative, and maybe I shouldn't put, you know, 20% of my portfolio into a business like that. And I believe that's what Howard Marks is also saying here, is that these companies can go on to produce massive returns for their shareholders. But it's extremely unclear who's going to be the winner, what the future of these businesses are going to look like, and therefore they probably are more speculative investments that don't, you know, have a high certainty of working out. But let's continue on and finish up the video with Howard Marks.
">> Based on the historic numbers, something like the S&P 500 is expensive today. There's no question about it. The PE ratio on the S&P 500 is around 24 on next year's on the next year's earnings and the historic average is 16. So you can't say it's not expensive. But what you have to engage in is and I in the my last memo the calculus of value I gave the what I thought was part of the bull case which is the S&P now is better. They're better companies. Uh, they have uh market dominance, fabulous products. note moes uh protecting against competition, enormous incremental profitability a and and great growth potential. Uh >> so the optimism is warranted. They're better companies, so they warrant uh higher multiples and the optimism is warranted. >> And I'm not knowledgeable enough to say that's wrong, but you you but this is an example of something called this time it's different, >> which you must that must worry you a little to say. >> Well, this time it's different is always said about the quote new thing. Um, >> it's said during bubbles too, right? >> It's well, especially in bubbles and it's it is the sentiment that gives rise to bubbles. This is something we've never seen before. There's no historical parallel. Uh, this thing's going to the moon. The valuations are high, but this time is different. >> So, can we expect 35 more years? >> Uh, all right."
So, that's pretty much the end of the interview. There was two last things that Marks says there. The first one is that the S&P is clearly expensive. It's well above its historical normal um price ratios, but it could be warranted because the companies that lead the S&P today are much higher quality than they were in the past, and they're also growing more quickly. I completely agree with this. The leading companies, Microsoft, Amazon, Google, Meta, these are these companies continue to blow me out of the water. And Nvidia, every time they're reporting earnings, it's just you're seeing the businesses accelerate. They're incredibly profitable, and it seems like they have a long runway for future growth and incredible moats. So, I do agree with him that the the S&P does deserve to sell for a premium today. For me, it all comes down to what is the price I'm paying for the growth that I am getting. And I believe the S&P is projected to grow by about 12% today. And its price-to-earnings ratio is 31. So, a 31 price-to-earnings ratio for 12% growth, I do still think is on the expensive end. And that's why for me, I'm not really interested in buying the S&P right now. In general, I am not an index investor. But I also believe that I can still find high-quality businesses that are offering more value and actually growing even faster. So I think the market is expensive. I agree with him that it's not necessarily in a bubble territory yet. And I also agree that the market should sell for a premium to historical averages due to the quality being higher today.
Now the second thing that he was asked about is "this time is different." And this is a kind of fun conversation to have because every time the market gets into a bubble, it's always different. I mean, during the tech bubble, it was different. Now, we have this potential AI bubble developing, and this time it's also different. But what's not different is people's emotions and how they respond to the new thing. And this goes back to what Howard Marks was saying earlier on in the video, where he doesn't think it's a bubble yet because we're not in this euphoric mania where no price is too high to pay for stocks as a whole. And I think that's telling because what causes bubbles is human emotion and human reaction, human euphoria to the new thing. It's not the new thing that creates the bubbles. It's how humans react that creates the bubbles. And human nature has not changed over the past 10,000 years. We tend to get very excited about the new thing. We tend to get over optimistic. We tend to think, well, there's no price too high to pay because this technology is going to change the world for sure. So, we should buy it at 100 times sales because, you know, it's clearly it's clearly the new thing. This time's different. And it's that thinking. It's the human emotion that causes the bubble. So, yes, while the technology may be new, our reaction to it doesn't change. And it's a it's cyclical. Humans tend to be cyclical. We get very excited about things. Then we get into, you know, the reality of this thing may not be as exciting as we thought. Then we see that massive correction. Then people's emotions become, oh well, now the market's down 50%, stocks suck. Now I don't want to own stocks. And that causes multiples to compress. So the the vicissitudes of the market is actually caused by human emotion and our reactions to price rather than the new thing and what the new thing actually is.
Now, with that being said, I believe Marks is talking about the overall market and he's not seeing this mania happening in the overall market, but I would say that we are actually seeing mania happen in certain sectors of the market. And I think that quantum computing is a straight-up bubble right now. We are seeing stocks in the quantum computing space sell for multi-billion dollar valuations while they're producing pretty much no revenue. The revenue is in the hundreds of thousands of dollars. Like this company right here, Cubit, is trading for a price-to-sales ratio of 15,000 today. 15,000. And it's losing tens of millions of dollars per year. Its stock is going nuts. And it looks like this company is not going to produce a a dime in profits for the next decade. This sector, quantum computing, is very bubbly to me right now. We're also seeing stocks like I believe it's Ollo. Let me make sure. Yes. So, Ollo is apparently a nuclear energy company with a $24 billion market cap today. And if we take a look, they're uh they're not even generating revenue. They have literally zero dollars in revenue. But they are they have a market cap of 24 billion. And in the trailing 12 months, or sorry, in the past year, they've lost $52 million. So, this company for some reason is being absolutely bid up by investors to the point where it's now a $25 billion company and it has yet to generate a single cent in revenue. So, this this to me is a reflection of people saying there's no price too high to pay for Ollo because I guess nuclear is the future and this company has a massive future that's in my opinion well priced in already. So I do think that there are areas of the market, small pockets of the market today, that are looking very bubbly to me. But as a whole, the S&P 500, I would say, is on the expensive end, but maybe justifiably so. And I do agree with Howard Marks where he does discuss that and talk about it. So I would overall just say, you know, be careful because there are areas of the market where people are being way too optimistic in my opinion, and price is getting well disconnected from fundamentals, and even if fundamentals exist.
So with that being said, let's now move on to Mercado Libre because this stock has been getting hit in the market quite a bit recently, and I have been continuing to dollar-cost average this one, buy it on the way down, because I do think it is offering a very compelling price relative to the quality of the business and its future growth potential.
So first, let's discuss why Mercado Libre stock has been getting hit recently in the market. The major news that I have been seeing is that companies like Amazon and Sea Limited are continuing to get more competitive in the e-commerce space in Brazil. Specifically, Sea Limited is expanding its infrastructure and its distribution center capacity in Brazil. And Amazon is offering sellers free seller fees. They're waving the seller fees for a period of time during the holidays. This is in an effort for Amazon to attract more sellers to Amazon's e-commerce platform, and Sea Limited is trying to attract more buyers and sellers to their platform as well, with the overall thesis being that the e-commerce market in Brazil is getting more competitive, which could hurt Mercado Libre's future growth potential and its profit margins. That's the synopsis of what I've seen at least.
Now, my opinion here, and I've listened to multiple interviews from the CEO and the CFO on this topic specifically, is that competition is nothing new in e-commerce in Latin America. Mercado Libre has been competing against Amazon for over a decade now, and they have been destroying Amazon. I am an Amazon shareholder, and I don't necessarily love to see that Amazon is being dominated by Mercado Libre, but as a Mercado Libre shareholder, I'm also very happy to see this. For example, I believe it was the CFO that I was listening to the other day. I have it in my notes here, but in 2019, Amazon's e-commerce market share in Brazil was 8%. And today, it's around 11%. So, Amazon has gained market share in Brazil's e-commerce space. However, Mercado Libre's market share in 2019 was 20%, and today it's 42%. So, Mercado Libre's market share has more than doubled to 42% whereas Amazon's has grown by 3% to a net of 11%. So, Amazon is having a very challenging time competing with Mercado Libre. And this isn't the first time that Amazon has announced something in Latin America and then Mercado Libre stock tanks, and then they go on to continue outperforming and outcompeting against Amazon. While the e-commerce space in Brazil could be heating up, getting more competitive, Mercado Libre is continuing to dominate and take market share and grow their fundamentals incredibly well. And I am reluctant to believe that this time is going to be different for Mercado Libre. I think that they're going to continue performing well, taking market share, and competing against Amazon in uh in Brazil specifically.
Now, that brings me to the next point that I want to make, which is that Mercado Libre is so much more than just a Latin America e-commerce story. My thesis for Mercado Libre has become that they are trying to digitize the Latin American economy. So, what I mean by that is they're trying to provide digital banking to Latin America. They're trying to provide digital buying and selling through e-commerce. And now they're also building an advertising platform. Mercado Libre's fintech business is the largest fintech business in Latin America. Their e-commerce business is the largest e-commerce business in Latin America across all of Latin America. Their advertising business is now number three, and I think it's in Latin America as well. They are the dominant company, and they're still just getting started, and I believe they have a long, long runway for future growth. The overall point is that this company is continuing to execute. They're continuing to grow market share, and I believe that the intrinsic value of this business is continuing to grow incredibly quickly. In fact, if we go and take a look at Mercado Libre's financials here, this company has one of the most ridiculous revenue growth charts I have ever seen. Let me just change the colors here. Here we can see that over any time frame, if I scroll here, this company has maintained a revenue compounded annual growth rate of well above 30%, and they're continuing that story today. This is a company that is producing $24 billion in annual revenue today, and it's still growing by 35 to 40% every single year. Additionally, I believe that Mercado Libre can generate around $5 billion in profits today. That is me going through their income statement, going through their cash flow statement, finding their growth expenses, and factoring those out to find, okay, what is the actual profit potential of the business today? What could it produce in profits for me today? And in my opinion, it's around $5 billion. This company has a market cap of $109 billion today. If we divide that by five, this means that it's trading for about 22 times profit potential, and it's consistently growing above 35% annually. So when I'm looking at the valuation of this company, I'm seeing a 21 multiple, 22 multiple for 35% annual growth that can probably continue for the next decade, at least around at least well above 20% growth in my opinion for the next decade. And when I take a look at that multiple for that level of growth, it looks like a very compelling investment opportunity for such a high-quality business with such a great track record that's also disrupting so many industries in Latin America with such a long runway for future growth. So, I think that this is just a fantastic business. And I'll show you the DCF that I run on this one.
So, I put in $5 billion in free cash flow potential. Let's say that their growth rate drops to, you know, 20% annually over the next 5 years, and it maintains a 22 price-to-free cash flow. So, in this scenario, we're saying that the multiple is not going to expand over the next 5 years, and their growth rates are actually going to come down significantly over the next 5 years to 20%. And even in this scenario, we get a compounded annual growth rate to the share price of 21% and a fair value of $3,300 per share. This is why I believe that Mercado Libre is selling below fair value today and could compound at very high rates of return going forward.
This is also a good point in the video to let you know that I have added two new videos to my investment course, which brings up the total content to 30 hours. Now, one of the videos that I added is a 30-minute video going through how I do discounted cash flow calculations, how I think about them, how I choose the right metrics, how I even get the metrics that I input to find the fair value and come to a conclusion on the intrinsic value of a business. I get asked all the time how I do DCF calculations and how I know which metrics to use and what to input. So, I decided, hey, I'm just going to make a 30-minute video and share everything I know and my entire process of doing this. So, that video has now been added to my investment course. If you already have access to my course, you get that video for free. You don't need to pay for it. But, it's also increased the value of my course and how much content there is in it. Again, it's 30 hours of content. I've been getting incredible reviews on the course. People have been absolutely loving it, and I think that you will, too. So, if you're interested in getting access to my investment course and learning everything that I know about investing and also getting all future content for free because I am going to be continuing to add more videos, then you can check out the link to my investment course at the top of my description. And there's also a 14-day money-back guarantee. So, if you buy the course and then you end up not liking it, then let me know, send me an email, and you will get your money back, no questions asked. So, there's a risk-free element to buying my course as well. So check it out and I think you'll enjoy it.
Now there's one last thing that I want to discuss about Mercado Libre, and that's that this stock has now been underperforming the S&P 500 over the past 5 years. And I've seen people online saying that this means the stock is not a good investment because over the past 5 years it has underperformed, so over the next 5 years it's going to underperform. This is the wrong way to think about investing in my opinion. Five years ago, Mercado Libre was overvalued. Straight up. It was a very, very expensive stock. So, what has happened over the past five years is the business has grown incredibly, incredibly well, but the share price has not grown at the same rate. And what that has led to is the multiples of Mercado Libre compressing significantly. So, here, let me show you. Let's take a look at Mercado Libre's price-to-sales ratio. Back here in 2021, it was trading for 24 times sales, which in my opinion is way too much. That is way too expensive for Mercado Libre's business. And if we look to today, its price-to-sales multiple has dropped all the way down to 4.5, which by the way is near its its historical low. It's almost never been cheaper on a price-to-sales basis. I don't love the price-to-sales metric, but just for the sake of making a point here, I do think that it is the best to make this point. So back here in 2021, we can clearly see that the stock was much, much more expensive. But over that time frame, Mercado Libre has grown its revenues from $4 billion in 2021 at the peak price-to-sales ratio to $24 billion today. So it has 6xed its revenue over the past four years, while the share price has definitely not 6xed. So I do not think that people should look to the historical share price performance over, you know, a given time frame and make a conclusion that the future returns are going to be similar. I think that you have to look at, okay, well, what was the price of this business 5 years ago versus what is its price today, and what have the actual fundamentals of the business done. What I do in my investing is I always try to focus on the fundamentals of the business and make sure that I am paying a fair price for the fundamentals today. Mercado Libre's price versus fundamentals 5 years ago was way too much. But now that its price has not done much, but its fundamentals have 6xed, now it looks like a very, very compelling price in my opinion. And therefore, I think the next 5 years for Mercado Libre's share price is going to look much, much better than the previous 5 years. Overall, you just have to understand that historical share price performance is not an indicator of the stock's current value or its future return potential. So looking at this one metric right here and then making a decision that Mercado Libre stock sucks is not an intelligent investment decision in my opinion, and you have to do some more work. You have to do some more digging, and always focus on the fundamentals and the price that you're paying for those fundamentals.
But with that being said, that is going to wrap up the video because I can see that this video is getting way too long. I did not want it to be another long video, but here we are. So, thank you all so much for tuning in. If you enjoyed the video, please remember to leave a like on it. And if you're new here and you want to see more content like this, then please consider subscribing to my channel. And as always, thank you so much for tuning in. I truly do appreciate it, and I hope to see you again in my next.