Monday, April 18, 2022

♟ Buy This Stock Before June 1 (Here's Why)

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"Fred Smith, who founded FedEx 51 years ago, will step aside on June 1. This announcement has brought uncertainty to FedEx shares - which (to me) creates a major opportunity."

Bryan Bottarelli, Head Trade Tactician, Monument Traders Alliance

Bryan Bottarelli

If you look up the term "duopoly," you'll see that it describes a situation where two firms have dominant or exclusive control over a market.

Some classic duopolies include...

  • Airbus and Boeing - which control the commercial aircraft market
  • Google's Android and Apple's iOS - which account for 99% of the mobile operating system market
  • DC Comics and Marvel Comics - which dominate the American comic book market.

But today, I'm going to focus on another duopoly - one that is often considered one of the strongest barometers of the strength of the U.S. economy...

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FedEx (NYSE: FDX) vs. United Parcel Service (NYSE: UPS)

The reason we're looking at the relationship between FedEx and UPS right now is simple...

As you'll see, FedEx looks extremely cheap compared with UPS. And that could set up a tremendous opportunity for you right now.

Here's the scoop...

Right now, FedEx trades at 10X projected 2022 earnings.

Meanwhile, UPS trades at 15X projected 2022 earnings.

If that gap seems extremely wide to you, you're not alone.

Barron's says that UPS "trades at an unusually wide premium to FedEx."

Both stocks have traded lower recently, which could be attributed to Wall Street's concerns about the economy - think fuel prices - or even consumer spending.

But it's not every day that you see a dominant duopoly with such a large valuation gap. FedEx has a 30% market share in the ground delivery segment.

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So why is there such a dramatic difference in premium between UPS and FedEx?

Here's my explanation...

It was recently reported that Fred Smith, who founded FedEx 51 years ago, will step aside as chief executive on June 1.

I think this announcement has brought additional fear, apprehension and uncertainty to FedEx shares - which explains exactly why we've seen the company dip compared with UPS.

But to me, this is a major opportunity. After all, FedEx is scheduled to hold an investor day in late June - shortly after Fred Smith officially steps aside. At this meeting, the company will most likely present on how it plans to boost margins and profitability. The meeting could act as a trigger for Wall Street to breathe a sigh of relief and move back into FedEx shares.

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YOUR ACTION PLAN

So buying now - while FedEx's share price is down - could be a savvy and opportunistic maneuver. When it comes to trading, the time to act is BEFORE the trigger catalyst - and that means now in this case.

And if you are looking for another timely play, Karim has found a stock for less than $2 that fits the bill. We both agree there isn't a single stock trading at a better valuation.

But you'll have to get in soon - because there's an announcement coming on May 12 that could send shares higher. Click here to get the details on this stock.

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MONDAY MARKET MINUTE

  • Interest Soaring! Bank of America (NYSE: BAC) blew away estimates and expects to make more from net interest income as rates move higher. The bank sees no slowdown coming in consumer spending. Tracking.

  • DiDi Dump DiDi Do! DiDi Global (NYSE: DIDI) went down 19% after the board authorized the company to organize a shareholders meeting to vote on the voluntary delisting of the company's American depositary receipts from the New York Stock Exchange.

  • Gold and silver spiked this morning, while crypto is headed in the opposite direction. Despite crypto being hailed as an inflation hedge, gold remains the stronger play.

  • Last week, we made 19.66% gains trading Charles Schwab (NYSE: SCHW) in The War Room. Today, Schwab is getting crushed. It's down 11% after reporting disappointing sales before the open. So you can buy Schwab stock and lose 11% today. Or you can trade Schwab options with us and make double-digit gains in a day. Learn more about The War Room here.

 

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