Companies are impacted by any number of uncertainties. Investors who wait for completely clear skies often miss out on the opportunity. But buying when things are starting to turn around can offer the best returns relative to the risk.
That’s especially true when buying shares of industry leaders. Taking advantage of a short-term fear can be the best way to get the optimal price for a company’s shares.
The most recent industry leader getting a big uncertainty off the table is
United Parcel Service (UPS). The freight and logistics company just avoided a big strike. While short-term traders are focused on higher labor costs, that pales compared to the cost of a long-lasting labor dispute.
UPS has underperformed the market over the past year, but with the economy holding up well, there may be further upside ahead. Shares are a slight bargain to the overall market at 15 times earnings.
Action to take: Shares are worth accumulating for the long haul at current prices or on any market drop. At present, shares also yield 3.5 percent.
For traders, shares will likely trend higher with this latest uncertainty off the table. The November $200 calls, last going for about $4.70, can likely leverage a move higher into mid-double-digit returns.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.
