What's Behind This Fund's $19 Million Bet on MercadoLibre Stock?

The headline number is clear: Pictet North America Advisors SA bought 2,703 shares of MercadoLibre for an estimated $5.68 million in the fourth quarter. That's a meaningful bet, but the real signal is in the details of the trade and the fund's skin in the game.

This wasn't a fresh entry. The fund has been accumulating since at least the third quarter of 2025. The Q4 purchase brought its total position to 9,342 shares valued at $18.82 million. That's a 1.79% stake in the fund's U.S. equity portfolio, a notable tilt toward a single stock. The credibility of the bet hinges on the fund's track record and the price paid. The position's value increased by $3.30 million in Q4, but that gain was driven by both the share addition and the stock's price movement. The math suggests the fund bought at a higher average price, meaning the bet was made when the stock was more expensive. That's a classic sign of smart money buying into a rally, not a panic.

So, is this a conviction signal? It's significant, but not a clear one. The fund is a disciplined accumulator, but the timing-buying into a stock that has already rallied 14% over the past year-hints at a contrarian or value-at-a-price play rather than a pure growth bet. The skin in the game is there, but the price paid tempers the bullish signal. In the end, this is a whale wallet adding to a position, but not a definitive call on MercadoLibre's next move.

The Skin in the Game Test: Who's Buying, Who's Selling?

The headline bet from Pictet is just one data point. To gauge true alignment of interest, we need to look at the broader tapestry of institutional and insider moves. The picture here is one of clear divergence, not consensus.

On one side, we have Overbrook Management Corp, a fund that had been a long-term holder. In its Q4 filing, it disclosed a full exit from MercadoLibre, selling its entire 5,592-share position for an estimated $13.07 million. That's a decisive move, trimming a high-quality international winner from a portfolio already dominated by mega-cap U.S. tech. This isn't a panic sell; it's a calculated rebalancing. Overbrook's portfolio is heavy in names like Nvidia and Alphabet, and reducing exposure to a volatile emerging-markets leader like MercadoLibre is a way to control risk and manage liquidity, not necessarily a vote of no confidence in the company's fundamentals.

The institutional picture is mixed, reflecting this split view. Some funds see a compelling growth story at a reasonable price, while others see a stock that has run too far, too fast, and is due for a pullback. This lack of clear consensus is the real signal. When smart money is divided, it often means the stock is at a crossroads. The skin in the game is there from both sides, but the alignment of interest is fractured. For investors, the lesson is to watch for which side's conviction holds when the next earnings report or market swing arrives.

The Competitive Trap: Why the Bet Might Be a Trap

The $19 million coupon bet is a classic growth-at-any-price play. But the real test is whether that growth is sustainable or a trap set by relentless competition. The evidence shows MercadoLibre is spending heavily to defend its turf, and that spending is directly eroding its profitability.

The company is reportedly investing nearly $19 million in coupons for its Black Friday sale this week. That's a massive promotional war chest, deployed against a wave of well-funded rivals. Amazon is working to gain a greater share of the market with seller fee waivers and credit partnerships, while Shein, Shopee, and Temu are targeting the region with low-cost goods. In this battle, MercadoLibre's response is to slash its free shipping threshold and absorb more logistics costs. The result is a clear conflict between growth metrics and margin health.

In the third quarter, Brazil's Direct Contribution declined 5.94% year over year to $475 million, even as revenue climbed to $4.01 billion. That's the core problem: the company is selling more, but making less on each sale. The Zacks analysis notes that incremental GMV is arriving with diminishing economic value. The aggressive shipping subsidies are a proven lever for boosting order frequency and GMV, as seen in the 36% year-over-year surge in Brazil GMV after the threshold was cut. But they are also the primary reason operating margin was restricted at 9.8% and why the stock is down 24% from its highs.

This sets up a dangerous dynamic. The stock's pullback has created a valuation opportunity, with shares trading at a forward Price/Sales ratio of 2.96X. But that discount reflects a clear fear: that rivals are gaining share, and MercadoLibre's subsidy spending is becoming a permanent, margin-squeezing cost of doing business. The competition is asymmetric; Amazon can fund losses through AWS, while MercadoLibre cannot. As one analysis puts it, the combined pressure from Sea Limited and Amazon suggests the company's subsidy spending represents a permanent defensive requirement rather than a temporary growth investment.

So, the smart money bet from Pictet is a bet on MercadoLibre's ability to out-invest and outlast this competition. The fund is buying into a rally, hoping the growth story can overcome the margin erosion. But the institutional divergence-Overbrook exiting while Pictet buys-shows there's no consensus on that outcome. For now, the trap is clear: growth is being bought with cash, and the returns are thin. The stock's vulnerability lies in that gap between headline revenue and underlying profitability.

Catalysts and What to Watch

The smart money is watching for a few key signals to prove or disprove the thesis that MercadoLibre's growth is sustainable. The next earnings report is the immediate test. Investors need to see if the margin pressure from shipping subsidies is easing or worsening. The Q3 results showed Brazil's Direct Contribution declined 5.94% year over year to $475 million even as revenue climbed. The watchpoint is clear: any further contraction in contribution margins, or a failure to show improvement in operating leverage, would confirm the trap narrative. Conversely, a stabilization or slight expansion in margins despite aggressive promo spending would signal the company is finding a new equilibrium.

Beyond the numbers, the competitive battlefield is shifting. The market's reaction to Amazon's new partnership with Nu Holdings has already been brutal, with shares dropping nearly 6% in recent weeks. The next catalyst is any update on how this partnership accelerates Amazon's seller fee waivers and credit offerings in Brazil. If Amazon's financial reach expands further, it could force MercadoLibre to spend even more on coupons and subsidies, directly impacting the bottom line. The fund's $19 million bet assumes it can outlast this pressure; the next few months will show if that conviction is justified.

Finally, watch the tape. The divergence between Pictet's accumulation and Overbrook's exit is a classic sign of a stock at a crossroads. The next 13F filings will reveal if other funds are following Pictet's lead or doubling down on Overbrook's caution. A follow-on buy from another major holder would be a bullish signal. More exits, or a wave of neutral filings, would suggest the smart money is waiting for a clearer catalyst. For now, the setup is one of high-stakes competition, and the next earnings report will be the first real test of which side's skin in the game matters most.