This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

8 Stocks to Ride the Economic Revival

(To add that UPS warns of a weak 4Q due to a pension accounting charge.)

BOSTON ( TheStreet) --Ben Franklin, founder of the U.S. Postal Service, now a $66 billion revenue business, had no notion what he was setting in motion.

But now it's listless, with a current reshuffling that's trying to save its long-standing service, mired in red pension ink and rising stamp costs.

Among the reasons for its slide is increased competition, for what had once been a virtual monopoly.

Given instant messages, emails, texts and tweets, the U.S. Postal Service's snail mail is a relatively obsolete way to communicate, but we still need letters and postcards to be delivered.

And one inkling that the transportation industry is on its way to a comeback is that the U.S. economy grew at its fastest pace in more than a year in the third quarter, the Commerce Department said Friday.

One encouraging sign was that consumers continued to step up spending, as more Americans got jobs, and their disposable incomes rose. Consumer spending, which accounts for more than two-thirds of demand in the economy, rose 2% in the fourth quarter, compared with 1.7% in the third and 0.7% in the second.

But you can't get too carried away with this, as the Federal Reserve has pledged to keep interest rates low through at least 2014, a sign the central bank doesn't think economic growth will be robust. So transportation demand is likely to be a slow-growth proposition.

As for the postal service, volumes have declined by more than 20% over the past five years, a decrease of about 40 billion pieces of mail, according to Standard & Poor's.

Who wins? UPS (UPS - Get Report) and FedEx (FDX - Get Report) are the small-package handlers seeing rising volume from Internet retailers that rely on them to ship their goods.

It's not a given for them. The Dow Jones Transportation Average, made up primarily of trucking, delivery and airline shares, is up 3.8% over the past 12 months, which is no rally given that the S&P 500 finished flat in 2011.

And the conglomeration of shipping companies, which include logistics and land transport companies, have seen a 20% three-year average annual return, according to Morningstar, and they should both jump once the economy rebounds.

S&P Capital IQ says that FedEx and UPS should be "the two big winners as the transportation of small packages evolves away from the post office."

FedEx has a "strong buy" rating, while UPS has a "buy" from Standard & Poor's stock analysts.

Even railroads, about as old-school as could be, are benefitting from the "cheaper-by-rail" business due to higher fuel costs. Investors have driven up their shares up an average of 36% over the past three years.

The wily Warren Buffett is in a great position, as a mid-continent carrier he owns will get a boost when the economy comes back. His Berkshire Hathaway (BRK.B - Get Report), which bought railroad Burlington Northern Santa Fe in 2010 for $27 billion, is in great shape. That's a vote for the transportation industry and that should support investor views that transport is a good investment.

Here are a few stocks that could beat the postman as parcel and message carriers replace the bag carrier, including UPS and FedEx.

1 of 9

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
UPS $100.98 0.46%
BRK.B $144.62 0.69%
CNW $41.98 1.50%
CSX $35.16 1.60%
FDX $176.51 1.40%

Markets

DOW 18,163.15 +121.61 0.67%
S&P 500 2,122.05 +17.85 0.85%
NASDAQ 5,100.1210 +67.37 1.34%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs