The Week that Was: FedEx, eBay, Amazon and Brookfield Infrastructure
Tim is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Though the week ended on a down note – the market itself didn’t perform well, and then there was that teeny little trading glitch on Friday that blew up Apple stock trading for a while – fundamentally little has changed. Opportunities remain across multiple industries and there are also a couple of over-bought stocks that bear a serious looking into.
Not exactly an afterthought lingering in the shadow of industry leader UPS (NYSE: UPS), FedEx (NYSE: FDX) remains an almost secondary consideration for investors intrigued by the logistics/transportation sector. As discussed last week there’s a lot to be intrigued about – an improving retail sector, online sales and a stronger economic environment overall (in spite of gas prices) – are all strong arguments for FedEx. Add to that last week’s positive earnings announcement and a valuation considerably less than UPS’s 21 times earnings and FedEx warrants serious investor consideration.
eBay and Amazon
Though a solid company with loyal customers, it’s difficult to justify Amazon’s ridiculously high relative value right now. As some reader comments from last week’s article will attest there’s more to Amazon’s (NASDAQ: AMZN) stock price than either fundamental or technical analysis warrants.
The contrast between Amazon and eBay (NASDAQ: EBAY) is an intriguing one. As eBay’s PayPal unit continues to expand its offerings and international reach in the digital payment sector, the stock continues to languish compared to Amazon. Why? Certainly not from a fundamental basis. eBay’s 15 P/E looks pretty good compared to Amazon’s 145 – but then what stock wouldn’t? This is purely an instance of investors knowing the company, understanding it and liking it – all good stuff mind you. But does knowing and liking a company merit valuations that are simply off the charts? Apparently so, at least in the short-term.
If you believe we are in a slow but steadily improving economic environment – both domestically and globally – one way to take advantage of that growth is investing in infrastructure. Now make no mistake – there’s very little that’s glamorous or exciting about companies in this sector – no Amazons, Apples or Netflix’s to get ga-ga about here.
With that said, too much excitement in a portfolio can be a bit unnerving, and infrastructure is a means of mitigating at least some of the wild swings other industries are prone to. Though several companies were discussed last week, perhaps one of the best options for investors is Brookfield Infrastructure Partners (NYSE: BIP). Infrastructure generally encompasses many sectors – energy, construction of roads and transportation (among others) – and there are opportunities in each. What sets Brookfield Infrastructure apart is the instant diversification company shareholders enjoy. Rather than one specific business line Brookfield has multiple divisions including energy, transportation and even timber. Oh, and let’s not forget a dividend yield approaching 5%.
Investors have a lot more than Bernanke to thank for the markets getting started off on the right foot. And as market fluctuations continue to remind us, the road leading to a full-fledged recovery is rarely a smooth one. But opportunities remain – just as they did last week.
The investment opinions included are just that, opinions. Investing involves risk, as you well know, so consider your decisions wisely. Tim holds no position in the securities mentioned in this article.