UPS, FedEx rated between 'buy' and 'hold'


Q. I have used UPS Inc. and FedEx Corp. for deliveries and was wondering which is the better stock investment. Your thoughts?

- J.C., via the Internet

A. They're in a dogfight and constantly barking up each other's tree.

UPS is the world's largest shipping carrier. FedEx is the world's largest express shipping carrier.

There's been good and bad news for UPS lately.

In an impressive $1.25 billion cash acquisition that is sure to increase competition with FedEx, it is acquiring the "less than truckload" carrier Overnite Corp. But in a major embarrassment, UPS lost a cardboard box containing computer tapes with personal information about 3.9 million Citigroup Inc. consumer finance customers.

FedEx profits were up 53 percent in the most recent quarter, compared with the UPS increase of just 16 percent.

International operations have helped both firms. Each does business in more than 200 countries and has targeted China for significant expansion. In the United States, however, competition from electronic document shipping is a growing concern.

Shares of both rivals are having off years. UPS Class B shares (UPS) are down 16 percent in 2005 after last year's 14.6 percent gain. FedEx shares (FDX) are down 11 percent after last year's 45.9 percent increase.

FedEx carries a heavier debt load than UPS, whose stellar AAA credit rating makes it less costly for it to finance projects and acquisitions. UPS is building regional freight hubs at five U.S. airports to expand its air freight business. But another important consideration is the fact that heavily unionized UPS has been in federal mediation talks with its pilots for the past year.

Wall Street currently views these two delivery service rivals equally, both receiving a consensus analyst recommendation midway between "buy" and "hold," according to Thomson Financial.

In the case of UPS, that consists of six "strong buys," two "buys" and eight "holds." FedEx receives four "strong buys," four "buys," seven "holds" and one "strong sell."

UPS earnings are projected to rise 20 percent in its fiscal year that ends in December, with next year's rise forecast as 11 percent, according to Thomson Financial. Its expected three-year annualized growth rate is 14 percent.

FedEx earnings are expected to increase 36 percent in its current fiscal year, which ends in May, while next year's earnings are projected to rise 15 percent. Its three-year annualized growth rate is pegged at 15 percent.

Q. What is your opinion of Janus Orion Fund? I bought shares in 2000 and am considering selling it.

- K.A., via the Internet

A. Remain in this fund only if you can deal with risk, since a sudden drop in one of its stocks can make a difference in its overall results.

It often invests in stocks for which there are high expectations. It also is heavily concentrated, with just 43 stock names. Such a strategy generally adds up to volatility.

The $542 million Janus Orion Fund (JORNX) gained 14.17 percent over the past 12 months and had a three-year annualized return of 12.03 percent. Both results rank in the top 11 percent of mid-cap growth funds.

"We like Janus Orion Fund for those who can deal with its potential risks because portfolio manager Ron Sachs does have an ability to uncover stories that aren't well-known," said Dan McNeela, analyst with Morningstar Inc. in Chicago. "Sachs does most research himself and has a reasonable amount of discipline in the prices he's willing to pay for stocks in his portfolio."

In charge since the fund's 2000 inception, Sachs will go anywhere in the world to find fast-growing stocks. He buys small-, mid- and large-capitalization companies, which average out to categorize it as a mid-cap fund. Health care and financial services each account for more than 20 percent of the portfolio. He has $100,000 of his own money in the fund.

The fund provided Sachs with his first opportunity to be a lead manager after working as an assistant manager on Janus Enterprise Fund. He recently began running the new Janus Triton Fund as well.

Janus Orion Fund's top 10 stock holdings, representing about 40 percent of the portfolio, were: Dade Behring Holdings, Chicago Mercantile Exchange Holdings, Companhia Siderurgica Nacional, Cisco Systems, CapitalSource, National Financial Partners, Celgene, EOG Resources, Berkshire Hathaway and Aracruz Celulose.

This "no-load" (no sales charge) fund requires a $2,500 minimum initial investment and has a very reasonable annual expense ratio of 1.09 percent.

A year ago, Janus settled with regulators to resolve allegations that it gave a dozen clients market-timing privileges in some of its funds. It agreed to pay $226 million in restitution, penalties and fee reductions.

Q. I don't understand the different types of life insurance. Can you explain them?

- N.C., via the Internet

A. Term life insurance is death-benefit coverage that lasts for a specific term of years and has no cash surrender value. Premiums tend to start out lower than those of permanent life insurance, but rise over the years.

Permanent life insurance is lasting coverage that combines a death benefit with an investment vehicle. It accumulates cash surrender value and the premium is level for the individual's lifetime.

"Virtually all term insurance today is convertible to permanent insurance," said David Woods, chief executive officer of the National Association of Insurance and Financial Advisors. "There are many different types of term coverage, such as some that renew automatically each year and some that let you renew at a higher premium when the policy terminates."

Within permanent life insurance there is whole life, which stretches out the cost of insurance over the course of your life; universal life, which lets you increase or decrease the amount of the death benefit; and variable life, whose cash value fluctuates with the performance of the underlying investments you've chosen.

Andrew Leckey is a Tribune Media Services columnist. E-mail him at

Copyright © 2019, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad