Cramer: In the War between FedEx and UPS, Who Prevails?
When it comes to stock-picking, sometimes it all depends on how you choose to play the game, Jim Cramer said Tuesday on CNBC’s “Mad Money.” Regardless of whether you’re a trader or an investor in these volatile markets, you will always find a stock out there well suited to your tastes.
Take FedEx and UPS, for example. The two major shipping names have both suffered recent sharp declines due to worries over a weakening global economy. Now, Cramer thinks both could make attractive buys, but stock pickers would be wise to factor in two key components – their risk tolerance and their time horizon.
FedEx will give you a fast and furious trade and dole out quick gains over the next few months. Last Tuesday, the company reported decent quarterly earnings and the stock edged higher at the close, but FedEx has since pulled back and now trades at 11 times earnings — lower than UPS’s P/E multiple of 14. “That means you’ve got a good entry point for the trade right here,” he said.
But more importantly, FedEx could also be driven higher by a handful of “big near-term catalysts,” including the major restructuring that its larger Express air shipping division is undergoing — a move that Cramer said should generate some “serious” cost savings. And while the company will be armed with positives going into its October analyst meeting, Cramer suggested buying the stock right after this week’s EU summit and selling come Oct. 9.
On the other hand, UPS will prove to be a sound long-term investment that will generate hefty returns over many years, Cramer said. The stock currently yields a “juicy” 2.98 percent dividend and is “much better organized” than FedEx — boasting more consistency, lower shipping costs and a centralized distribution center. The firm is also acquiring international shipping company TNT — allowing UPS to tap into its Asian and Latin American markets and to benefit from higher margin services.
The bottom line: It depends. If you want a quick and dirty shipping trade, then FedEx is the stock for you. But if you’re looking for a solid, long-term investment, then UPS is the way to go.
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