FedEx

Consumers are demanding cheap, instant delivery. They have $70 billion of sales, 150,000 ground vehicles and 650 aircraft. They lead in this area. Sure, they compete with Amazon, but FedEx is able to grow over their ground delivery in the next 3-4 years by 100%. They will get out of the penalty and the market will reward them. (Analysts’ price target is $172.08)

He likes the UPS name. There are really only two big players in the space, them and FedEx. He prefers FedEx and owns that one. The problem is that there is a growing need for capital to move towards same-day delivery. He thinks FedEx did a smart thing pushing back on Amazon pricing terms and they have reduced their exposure to them to only 1% of revenues.

It keeps missing earnings. Based on expected earnings, it's very cheap. Value has underperformed growth with the highest differential since 19 years. The company cannot hit the earnings. They are facing competition from Amazon. Organic revenue growth is zero and the balance sheet is worsening.

FedEx vs. UPS FedEx has more problems, namely absorbing a big European acquisition of TNT Express, but both are impacted by Amazon's move into overnight delivery and the trade war. He won't buy them, but prices are starting to look attractive. Wants to see a turnaround before buying either.

It's seen a perfect storm from internal and external factors: the US-China trade war, a costly cyberattack overseas, and Amazon competition. But there is enormous potential as overnight delivery grows and drone delivery and e-cars reduce labour costs. He sees a $12 EPS trough this year. On the upside, he sees $17-18 EPS on a 15x multiple as FedEx improves. FedEx is a force led by a tough CEO.

It has struggled as it competes more with Amazon, but what they do well is B2B (not B2C). Fedex is seeing a lot of change to build that infrastructure to fulfill B2C. If you are patient, there is enough asset quality in Fedex that they own around the world to make it worth holding. Be patient. Fedex will come around maybe in three years. Also own this with Cargojet or Amazon.

They have such a strong position that you wonder why they don't have a stronger position. It is the AMZN-Q situation. They are more of a value trap. People seem to prefer UPS.

(A Top Pick Dec 19/18, Down 7%) They are in the penalty box by investors due to the trade war issues and an acquisition that became the victim of a cyber attack. E-commerce has created competition with Amazon. Will it become part of the next wave of e-commerce (including autonomous vehicles), he thinks so. He expects this will lead to a 15 times multiple pushing almost $300 in the future. You need patience, but should be a holding.

This is a good indicator of the economy as it represents the movement of goods to the consumer. Amazon has disrupted their part of the world as they have setup their own delivery service in the US. At some point it will be time to buy, but it is not now.

They're caught in a competitive space to deliver parcels, an exploding business; Amazon is now competing. FedEx has an enormous fleet of trucks, planes and vans. The sector is slightly economically sensitive. Maybe steer clear of this for now. No, it won't blow up, because consumer spending is strong, but there will be margin pressure.