UPS vs. FedEx: Which Stocks to Buy?

As crude oil prices continue to skyrocket, you may think I’m foolish if I buy transportation stocks during that time. However, while there will always be some interdependent correlations between the price of oil and the price of transportation, there is a growing percentage of other intangibles that may have a more compelling effect on each of these actions. Fundamentals, emerging markets and competition in general have the potential to affect the price positively or negatively. The key, however, is to find which of these actions will be most favorably affected.

Starting with the basics, both UPS (UPS) and FedEx (FDX) are relatively similar. Both have growing margins on 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 oil prices. While investors may argue that UPS has slightly more margin growth relative to FedEx stock, FedEx also has a better EPS and P/E ratio to combat the discrepancy. Since fundamentals don’t really play a role in determining which stock to buy, the real indicator would lie in the technical side.

Since entering the market in 1980, FedEx has surprised many investors with its strong growth and all-time highs during its 26-year history. Growing close to 4,000% adjusted for dividends and splits, FedEx has provided investors with a safe option with a good dividend payout, as well as a near guarantee that capital gains will increase within a few years. By contrast, UPS, which entered the market in late 1999, has only grown 16% year to date with very little 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 on which corporation has the most positive consumer sentiment.

Supporting a historical resistance level of 90.00 and a support level of 50.00, UPS contributes to its wide swings in price with no clear advantage, resulting in a very risky opportunity for investors. FedEx, with only minimal fluctuations throughout its duration, has a positive impact for investors, supporting large capital gains for timely consumers. While there is always the long-term potential for UPS to become more innovative and take over the concentration index that FedEx has, with trends supported through technical and fundamental analysis, at least for the next several years, FedEx is the winner should provide the investor with a higher capital gains ceiling.