Summary
- The horrible 2020 results are due to short-term factors.
- FedEx has a long and strong growth runway ahead of it.
- Attractive valuation during a down year is precisely when you want to buy cyclical companies like these.
- Looking for a portfolio of ideas like this one? Members of iREIT on Alpha get exclusive access to our model portfolio. Get started today »
We maintain a buy rating on shares on Monmouth Real Estate (MNR), an industrial REIT with outsized exposure to FedEx (FDX). Given the fact that this REIT has a significant amount of revenue from FedEx (59.6% based on Annual Rent and 48.0% based on Square Footage) we decided that we would take a closer look at the shipping giant.
Fortunately, my colleague, Dividend Sensei, on Dividend Kings, has put together an extensive research report on FedEx, a company that Dividend Kings has bought four times in the Deep Value Blue Chip portfolio.
(Source: F.A.S.T Graphs, FactSet Research)
Besides us, FedEx has gotten several buy recommendations including:
From Barron's
Jeff Miller (who bought it two weeks ago for his client's accounts)
Chuck Carnevale
Why? Because this is a fast-growing, competently run cyclical company that's experiencing an industry downturn that has caused its valuation to collapse to the most attractive level in a decade.
(Source: F.A.S.T Graphs, FactSet Research)
Anyone whose ever been interested in FedEx should be considering starting or adding to their position today. In fact, there are three reasons why I consider FedEx a "good buy" right now, and from its 16% undervaluation, it's likely to deliver strong market-beating long-term total returns.
All while paying an above-average safe dividend that's likely to grow two to three times faster than the dividends of the broader market.
Reason 1: The Horrible 2020 Results Are Due To Short-Term Factors
(Source: Seeking Alpha)
FedEx has been having a rough 2019, missing earnings expectations in three of the last four quarters. That's due to the cyclical nature of its business as well as a $5.9 billion investment program that it's undergoing to improve efficiency and global delivery capacity.
...Originally Posted On Seeking Alpha
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