Midterm elections have been good for stocks since 1946; Earnings from Global Payments, MercadoLibre, and AppLovin

1) A friend sent me an interesting statistic yesterday: In the past 20 midterm elections going back to 1946, the S&P 500 Index has risen the next 12 months every single time.

This sounded like one of those silly Internet rumors – 20 for 20, really? So I fact-checked it... and it's true!

The average gain has been a stellar 14.8%, far above the average annual gain for the market over that period of 8.7%. (Neither of these figures includes dividends, which would boost the returns even further.)

Interestingly, especially in light of what I wrote in yesterday's e-mail about not letting your politics affect your investing, the pattern held regardless of who won. In nine of those midterms, the president's party lost control of the House, the Senate, or both.

So I'll repeat what I've said many times: Ignore the political noise and invest in the stocks of high-quality companies and/or index funds for the long run.

2) It's like drinking from a fire hose trying to keep up with all of the earnings reports coming out from companies I follow. Let's take a look at three of them today, and I'll catch up on others in upcoming e-mails...

First up is payment processor Global Payments (GPN). As I discussed in yesterday's e-mail, the company's possible buyout offer caused the stock to pop 13% last Friday.

It reported a steady-as-she-goes third quarter today, and the stock ticked up slightly this morning. Normalized revenue was up more than 4%, and adjusted earnings per share ("EPS") rose 10% to $3.58 – both in line with expectations.

Management raised the run-rate expense synergy target from its Worldpay acquisition to $650 million, up from the $600 million announced with the deal.

It also reaffirmed full-year guidance of 4% to 5% adjusted net-revenue growth, adjusted EPS of $13.60 to $13.80, and more than $2 billion of share repurchases.

With the stock around $96, it's trading at a mere 7 times the midpoint of management's full-year guidance. That's absurdly low for a high-quality, growing company.

No wonder buyout firms are circling. They could pay a big premium and still be stealing the company, which is what I expect will happen.

My team and I recommended Global Payments at $76.02 in the June 2025 issue of our flagship newsletter, Stansberry's Investment Advisory. Since then, it's up around 31%.

Only subscribers can read our full write-up on the company and receive updates, plus access our archive of past ideas and portfolio of open recommendations. If you're not already subscribed, you can do so by clicking here.

3) Latin American e-commerce giant MercadoLibre (MELI) reported weak third-quarter earnings yesterday (you can access the shareholder letter and presentation here). As a result, the stock tumbled as much as 16% this morning.

This comes in the aftermath of its 11% to 12% decline last week after the surprise victory of socialist Luiz Inácio Lula da Silva in Brazil's presidential election.

Revenue of $10.75 billion rose 45% (41% currency-adjusted), surpassing estimates of $10.66 billion. But EPS of $8.83 missed expectations of $9.27. And operating income came in at $676 million, down from $724 million year over year ("YOY") and below estimates of $731 million.

With revenue up 45% but operating income down YOY, that means MercadoLibre's operating margin has majorly compressed – from 9.8% a year ago to 6.9% in the first quarter, 6.7% in the second, and 6.3% last quarter.

Management gave three causes for this:

• Shipping took 40 basis points ("bps") off gross margin. Shipping charges rose 60 bps, which only partly offset a 100 bps rise in costs. This was due to less revenue per shipment from more free shipping, lower order values, higher energy prices, and added fulfillment capacity.

• Sales and marketing rose 40 bps sequentially to 11.6% of net revenue, reflecting more investment in the affiliate program in Brazil. The company called this a tactical decision, so it's discretionary.

• The expanded fulfillment capacity added 20 bps to general and administrative expenses through recruitment costs.

Part of this is timing, with capacity built ahead of the holiday peak and one-off hiring costs for the season. The worrying part is that management keeps adding new spending...

On the earnings call, the company's recent Argentina free-shipping expansion was named as the main new initiative. Management also expects continued investment in areas like affiliates and logistics capacity, which may weigh on margins in the near term. There's no margin floor or recovery timeline, which is why Wall Street is cutting estimates.

In summary, the business is getting stronger by the metrics that matter long term, like market share and purchase frequency. But the market has spent a year looking for a margin trough, which it didn't get this quarter – and likely won't next quarter.

At this morning's price of around $1,500, the stock is at a two-and-a-half-year low. It's trading at 39.3 times this year's estimates and 27.2 times next year's.

Those multiples are too high for me. But my team and I will continue to follow MELI, and if we decide it's a compelling idea, Investment Advisory subscribers will be the first to know.

4) Shares of online-advertising company AppLovin (APP) soared as much as 34% this morning after the company reported a huge beat-and-raise third quarter. That's following the stock's 11% gain yesterday.

Revenue of $2.2 billion was up 55% YOY, beating estimates of $2.1 billion. And EPS of $4.30 jumped 76%, handily beating estimates of $4.04.

The company generated $1.4 billion of free cash flow during the quarter and used all of it to buy back stock. The board boosted the buyback authorization by $3.2 billion to $3.6 billion.

AppLovin increased revenue guidance for next quarter to between $2.365 billion and $2.395 billion, which would be 43% to 44% YOY growth.

It also increased guidance for adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA") to around $2 billion, with the midpoint about $130 million above consensus estimates.

Overall, this was an impressive quarter. And the stock is no longer overvalued – it's trading at a high-teens multiple of this year's earnings.

So while I continue to share the concerns raised by activist short sellers, which I covered in previous e-mails, I'm going to remove AppLovin from my "Stinky Seven" list of stocks to avoid – making it the "Stinky Six" once again.

Even with the latest jump, the stock is down by more than 40% from where it was when I added it to the list on October 29, 2025.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.

P.P.S. My dad had a transcatheter aortic valve replacement ("TAVR") at Dartmouth hospital yesterday morning. It's a minimally invasive procedure to fix his narrowed heart valve, which doctors discovered after he had a ministroke in August. Hopefully this will cure the chronic weakness and occasional dizziness he has been experiencing.

The doctors said it went well and were going to send him home yesterday. But they noticed some irregular heartbeats, so they kept him overnight and likely will tonight as well. There's a chance he may need a pacemaker.

I woke up in the middle of the night and felt like I should join my mom and sister to be with him – and hopefully take him home to our nearby lake house this afternoon. So I booked a flight to the Lebanon, New Hampshire airport, went back to sleep for three hours, biked to Penn Station, took a shuttle to the Westchester airport, took a short Cape Air flight, and arrived at the hospital around 11 a.m.

He has to stay in the U.S. for another month so the doctors can monitor him. Then he and my mom will fly home to Kenya. Here's a photo of us at the hospital and the little plane I took to get there, which had two pilots and only three passengers: