United Parcel Service (NYSE: UPS) has not performed as expected over the past four months - the stock has meandered - but I'm nevertheless Reiterating my Buy rating for the company, first recommended on April 7, 2009 at a price of $51.28. Here's why: Although institutional investor purchases of UPS appear to have been delayed, on concern the U.S. economic recovery won't arrive on time in Q3, share repurchase should support the stock.
Further, should more-bullish macroeconomic data appear in Q3/Q4, look for a quick 20% rise in UPS's shares, as the big investors play catch-up. Hence, the risk/return remains favorable. The First Call FY2009/FY2010 EPS estimates for UPS are $2.13 to $2.62.
Stock Analysis: United Parcel Service is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in UPS now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your UPS position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $33.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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