As the world’s economies right themselves the need for communication, delivery of parcels, and speedy delivery of products is multiplying. The major delivery companies, Fedex and UPS as well as German DHL stand to benefit. The question for the day trader is which companies will prosper and which will fall and when will their stocks make big moves?
Fedex’s stock has doubled during the market rally. Those who were trading Fedex had to opportunity to make nice profits. Fedex, UPS, and DHL are not just package delivery companies. These companies are heavily involved in logistics, the movement of materials around the world, through customs, and to multiple end destinations.
The package delivery business has expanded to a much more complex undertaking involving locations in every country of the world, fleets of airplanes and trucks, and sophisticated software and the people running it. Because of the current complexity of delivery companies this has become a “high cost of entry” business. As such it is unlikely we will see new competitors on a global scale any time soon. Thus the field is limited to three giants making the research easier for the day trader.
One of the prime movers in the stock prices of the delivery companies is going to be the economic recovery of China and of the USA. The busiest trade route for years has been the cross Pacific run from Asia to US West Coast ports. Much delivery company work has involved the transfer of cargo at Long Beach and at Oakland to trains and buses to carry cargo into the central and Eastern USA. In 2014 we can expect to see completion of the new “third lane” of the Panama Canal that will allow much larger boats, carrying much more cargo, on to North and South American East Coast ports. The delivery companies ready to deal with this historic shift in shipping patterns may well be the most successful into the mid 21st century.
In the meantime Fedex, UPS, and DHL are gearing up as China starts to produce again and Europe (more than the USA) starts to buy again. With economic recovery and buying power better in Europe DHL stands to gain for now as it pulled out of the US market last year. When the US economy perks up more DHL will lose out.
In logistics the devil is in the details. The delivery companies deal with millions of transactions a day and those that can manage the huge complexity of their operations efficiently make more money and see their stock prices go up. Here is where the day trader needs to be aware of how management obtains and maintains efficiency. When you start seeing a company crowing about profits after laying off employees beware when business comes back and they do not have the talent on hand to handle the traffic.
As always, trading delivery companies, or any stock, means homework, practice, and attention to detail. It means not getting sucked into group psychology when the markets are on the verge of something new. Do your homework, practice, and may you trade the delivery company stocks successfully.
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