Betting on the Death of the Post Office

David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

For a long time I'm been thinking about, what would happen if the U.S. post office shut its doors for good? Today, I think that may be a real possibility given new rounds of federal buyouts, postage price hikes, and talks of reduced residential mail delivery. So, which companies would be the primary beneficiaries of such a move? Well, the first stocks which come to mind are UPS (NYSE: UPS) and FexEd (NYSE: FDX). Of the two UPS is the clear leader in the private mail delivery business, possessing a wide economic moat, a profitable business model, and nice fat 3.1% dividend.

As for FedEx, there a lot to like about the company’s rising earnings and growth prospects. However, it has an anemic dividend of 0.6%. If the post office went out of business both companies would benefit handsomely as the two primary carriers of all U.S. mail, even though UPS would likely maintain its market dominance. So, what other companies would benefit from such a move? Obviously, those dealing with electronic information dissemination, Google (NASDAQ: GOOG), with its popular Gmail e-mail program and Microsoft (NASDAQ: MSFT) with its ubiquitous Hotmail e-mail. In fact, e-mail users have successfully been able to supplant the postal system, public, private, or others through the use of e-mail and electronic document delivery, a service that may be offered on a fee basis should the post office falter.

As such, both the private carriers and dominant IT providers and perhaps telecoms such as AT&T and Verizon, whose users depend on their networks to access the Internet and applications such as e-mail, would also likely benefit from the end of the public postal system. Of course, the bad news for consumers, at least at first, would be less competition in document transmission and delivery would likely lead to increased cost, at least on the front-end of the transaction. However, I think in time, consumers could in fact stand to gain from the demise of USPS, as increased private sector competition would lead to lower costs and increased quality of service (QoS).

So who are the real winners out of this equation? The answer is two-fold. In brief, first and foremost are investors, holders of private sector mail carriers would likely see a windfall from an explosion of new customers, especially B2B transactions, leading to increased profits for shareholders. In the long-term customers would see marked improvement in their options and services from ISP's, technology companies, and private mail carriers previously unseen or little utilized in the current economic data delivery landscape. In short, the death of the federal post office would lead to the kind of necessary innovation and increased competition necessary to finally enable Main Street and Wall Street to achieve the necessary (and long overdue) efficiencies needed for the United States to meet the growing needs of the 21st century in a complex global marketplace. If you believe that to be the case, serious consideration should be given to stocks which meet these previously untapped demands.

Keep searching

These are just a few! There are even more postal and data delivery stocks. While, no stock is a sure thing, each one has its advantages and disadvantages and must be carefully weighed prior and during investment. But some investments are a lot better quality than others. By examining each opportunity carefully, you'll go a long way toward improving your investing skills and learning how to separate out the most attractive investments, package delivery, technology, or otherwise, from the rest.

dmercer1 has no positions in the stocks mentioned above. The Motley Fool owns shares of Google and Microsoft. Motley Fool newsletter services recommend FedEx, Google, Microsoft, and United Parcel Service. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

This article is to be used for educational, research and informational purposes only and does not constitute investment advice. There are no guarantees, expressed or implied, of future positive returns in regards to the subject matter contained herein. Understand the risks inherent in investing before making the decision to invest or consult an investment professional for more information. Reasonable due diligence has been performed in regards to the information in this article. However, the author expressly disclaims any liability for accidental omissions of information or errors in fact.

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