Value Stocks Episode 10 – FedEx
- Recent price pullback has brought shares to a much more reasonable value based on future growth expectations.
- Moat is well-established and will likely not be penetrated by Amazon or any other company in the near term.
- Growth expectations should be slightly better than GDP growth and inflation over the long term.
In this episode, we discuss FedEx Corporation (NYSE: FDX). FedEx is a courier/delivery services company founded in the 1970s and headquartered in Memphis, Tennessee. They have been a leader in their industry for many decades, having quickly adapted to and benefiting from trends such as e-commerce, globalization and technological innovation. Recently, the stock price has dropped almost 40% from its 52-week high of $274, which initiated our interest in researching the company.
Podcast Summary Notes
0:00 – Company Introduction
- What do they do?
- What is their market cap?
- Do you own the stock?
2:45 – Why did you want to talk about this company?
- Down almost 40% from its 52-week high
- Attractive/strong moat
- High-quality company with good reputation and few competitors
4:00 – What do you like about the company?
- Price drop
- Brand recognition
- First-mover advantage
- Network advantage
7:20 – What do you dislike about the company?
- Capital intensive
- FedEx Ground business is becoming more competitive due to Amazon and other players
- TNT acquisition
19:30 – Thoughts on management?
- Industry leaders
22:00 – What are your thoughts on moat?
- Strong identifiable moat in the express shipment division due to airlines having high barriers to entry
- Strong moat when you assess their whole network which they have built up over the years
26:00 – What are your thoughts on growth, cash flow, and capital allocation?
- Growth long term could be slightly above GDP and inflation
- Minimal distribution of dividends and buybacks by management
31:00 – Valuation/Intrinsic Value of the business
- How did you calculate the intrinsic value?
- Is it an above-average business?
42:50 – Final thoughts on the business
46:00 – Thoughts on markets in general and Berkshire AGM