As crude oil prices continue to skyrocket, you may think that I am foolish to buy any transportation equity during such a time. However, while there is always going to be some interdependent correlations between the price of oil and the price of transports, there is a bigger and larger percentage of other intangibles which may have a more pressing effect upon each of these stocks. Fundamentals, emerging markets, and overall competition all have the possibility to affect the price positively or negatively. The key, however, is to find which of these equities will be affected in the most favorable manner.
Beginning with fundamentals, both UPS (UPS) and FedEx (FDX) are relatively similar. Both have increasing margins in both revenue and profit, good and growing cash flow, and relatively steady growth. With new markets such as China, India, and Eastern Europe continuing to expand, such growth should continue and contribute to higher potential figures regardless of the price of oil. While investors may argue that UPS has a little more growth in terms of margins relative to shares of FedEx, FedEx also has a better EPS and P/E ratio to combat the discrepancy. Since fundamentals play really no role in determining which stock to purchase as the real indicator would be found on the technical side.
Since entering the market in 1980, FedEx has surprised many investors with its heavy growth and record highs through the 26 year duration. With a near 4000% growth adjusted for dividends and splits, FedEx has provided investors with a safe investor’s choice with good dividend payout as well as an almost guarantee that capital gains will be accrued for in the span of a few years. In contrast, UPS which entered the market in late 1999 has only grown 16% to date with very little in terms of positive stability and growth. Comparing that to the 200% increase in price FedEx had during its first six years makes the choice a bit easier over which corporation holds the most positive consumer sentiment.
UPS which supports a historical resistance level of 90.00 and a supporting level of 50.00 contributes to its large fluctuations in price with no clear lead resulting in a very risky opportunity for investors. FedEx, with only minimal fluctuations throughout its duration, holds a positive chime for investors, supporting large capital gains to timely consumers. While there is always potential in the long run for UPS to become more innovated and take over the concentration ratio held by FedEx, with the trends supported through both technical and fundamental analysis, for at least the next few years FedEx is the victor which should provide the investor with a higher ceiling of capital gains.
Dennis Biray presents advice on all kinds of topics ranging from finance and investing to fitness to sports. For more information email him at email@example.com , or to view other articles written by him visit http://www.biraynetworks.co.nr