Delivery trucks are taking over the streets in droves

There’s a scene in my favorite musical, “The Music Man”, that’s been on my mind as we get closer to Christmas.

After traveling salesman Harold Hill convinces the town that their new pool table will be the downfall of their youth and that the only solution is a boys marching band, the town waits for the instruments and uniforms to be delivered.

Then, down the road, comes the Wells Fargo wagon. And the town breaks into a number about what could be getting delivered and what they’ve had delivered in the past. They list everything from a bathtub to a rocking chair, from salmon from Seattle to raisins from Fresno, Calif.

Before this year, I couldn’t imagine waiting for the delivery man to bring me items that would be so easy to pick up at the big box store five miles from my house.

But in the past 24 hours, I’ve received packages containing new jewelry, a vintage t-shirt and even two new tires for my car.

The future of e-commerce is here, and shipping infrastructure is attempting to keep up with demand. Christmas is already the busiest time of the year for both e-commerce and shipping companies. Add on 2020’s unique situation — families who would usually shop and spend the holiday together remaining apart, overall lack of travel and the added demand for everyday items — and it’s easy to see why shipping companies are starting to feel the stress.

During this holiday season, analysts believe we could see an estimated three-billion packages flowing through this infrastructure. That’s approximately 800 million more than last year.

Even though there are still two weeks until Christmas, the delays are already piling up. Some stores have already said it’s too late to guarantee delivery by the holiday.

One thing is for sure, delivery drivers are going to be working hard through the end of the year … and well into the future.

That means these companies are going to continue raking in profits. So, let’s take a look at which ones would be the safest place to invest if we want to jump on this trend.

First up, let’s look at United Parcel Service (NYSE: UPS). The company is currently rated “B-” and shares are up 41% since the beginning of the year.

This shipping giant was started in 1907 and has a long history of “firsts” as it developed into the largest package delivery service in the United States.

Just last week, UPS told its drivers they had to refuse pickups at certain larger retailers. Although it appears the company is getting too bogged down, the real story is that the company is holding merchants accountable to volume agreements.

The company stated it is committed to working with all its customers. This means communicating with large retail customers to ensure they know how much capacity is available to them. But it also means making sure there is network capacity available to small and medium sized businesses.

So, even though on the surface this looks like a bad thing, such a rapid increase in demand is always a great problem to have.

On top of holding a “Buy” rating, the company also pays a dividend —always a nice bonus in the current low-yield environment. This means it’s definitely a good candidate if you’re looking to add exposure to shipping trends in your portfolio.

On the other hand, FedEx Corporation (NYSE: FDX) has a “C+”, or “Hold”, rating right now. The Weiss Ratings system deems that the prospects for the company’s stock are about average based on its current status.

Shares are up 98% since the beginning of the year.

So, if FedEx is currently in your portfolio, you might still see some gains. This is especially true as investors run up these shares anticipating the high holiday shipping revenue.

Consumers are getting spoiled by e-commerce. The ease of having practically anything showing up on your doorstep at breakneck speed is addicting. These patterns are going to be hard to break ... even if we could supposedly return back to “normal” overnight.

Grabbing gains in this expanding field could be a nice short-term opportunity. Or it can be the first step in a longer-term investment. Either way, the shipping industry is delivering profits this holiday season.

Best,

Kelly Green