Fomento Económico Mexicano S.A.B. de C.V, better known as FEMSA, is a giant. This Mexican multinational operates a vast network of businesses, from Coca-Cola bottling plants across Latin America to the ubiquitous OXXO convenience stores found on almost every street corner in Mexico. It's a company that touches millions of lives daily, a familiar presence across diverse consumer landscapes. But beneath the surface of its sprawling operations, a hidden gem lies buried in its financials, a subtle shift that's gone largely unnoticed by Wall Street.

While the majority of analysts are focused on the broader trends in FEMSA's latest financial data – the slight quarterly revenue growth, the dip in earnings – a more profound story is unfolding in the company's working capital. A closer look reveals a significant increase in FEMSA's net working capital, jumping from approximately 145.5 billion MXN in Q1 2023 to a staggering 173.8 billion MXN in Q4 2023. This isn't just a minor fluctuation; it's a whopping 19.4% increase in just nine months.

This surge in net working capital, a measure of a company's ability to meet its short-term financial obligations, suggests FEMSA is strategically positioning itself for a major move. The company is accumulating liquid assets at an impressive rate, building a war chest for potential acquisitions, expansion, or even a stock buyback program.

"Imagine FEMSA, already a dominant force in Latin America, acquiring a major player in a new market, perhaps expanding its convenience store empire into the United States or making a play for a large beverage distributor in Europe. The possibilities, fueled by this surge in working capital, are tantalizing."

What's even more intriguing is that this aggressive accumulation of liquid assets is happening during challenging economic times. Inflation is a persistent concern, and consumer spending is under pressure. Yet, FEMSA isn't just weathering the storm; it's preparing to capitalize on it. The company is betting on its ability to emerge stronger from the current economic turbulence, ready to seize opportunities that may arise from the struggles of its competitors.

FEMSA's Net Working Capital Growth (Q1 2023 - Q4 2023)

The following chart illustrates the substantial growth in FEMSA's net working capital over the last three quarters of 2023.

This strategic foresight is reminiscent of FEMSA's history. The company has consistently demonstrated a knack for identifying and capitalizing on growth opportunities, transforming itself from a regional brewery into a global powerhouse over the course of its 134-year history. From its pioneering move into the convenience store sector with OXXO to its recent forays into the European market with its Valora acquisition, FEMSA has proven its ability to adapt and thrive in ever-changing market conditions.

The current surge in working capital could signal the start of another transformative chapter in FEMSA's story. While Wall Street focuses on short-term earnings fluctuations, the company is playing a longer game, laying the foundation for future growth and expansion. This overlooked detail in FEMSA's financials may not be making headlines today, but it could very well be the catalyst for a significant market shift in the years to come.

"Fun Fact: FEMSA operates over 20,000 OXXO stores in Mexico, more than any other convenience store chain in the country. OXXO is so ubiquitous that it's often jokingly referred to as the "national bank of Mexico.""