When Warren Buffett's Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) announced its $34 billion acquisition of Burlington Northern Sante Fe (NYSE:BNI), Buffett remarked that it was a big bet on the long-term recovery of the U.S. economic system. Indeed, rails carry our most essential commodities like coal and other supplies we depend on each day. As the economy improves, demand for such commodities improves as well.

IN PICTURES: 20 Tools For Building Up Your Portfolio

Going Airborne
In a somewhat similar fashion, investors might want to consider a bet on global shipping giant Federal Express (NYSE:FDX) as a excellent long-term play on a sustained economic rebound. Like Buffett, I emphasize "long-term." While Berkshire will likely own Burlington for decades, investors would likely need to consider a five-year horizon to appreciate what Fed Ex offers as an investment. (For related reading, see Think Like Warren Buffett.)

The first major appeal is the entrenched duopoly that FedEx shares with UPS (NYSE:UPS). Over time, FedEx and UPS will solidify their duopolistic position and with that will come a nearly impossible barrier to entry. That economic moat is a huge plus. This past January, privately held DHL, a German shipping company, pulled out of the United States.

Numbers You Can't Ignore
Despite the fact that FedEx shares have more than doubled since their March lows, the future growth potential for FedEx is enormous. This economic recession has damaged or eliminated a lot of smaller competition, which has enabled FedEx to grow its business despite the weak environment. FedEx has more than doubled its market share of the U.S. domestic market to over 22% today versus 10% in 1999.

During the economic peak, FedEx shares fetched nearly $125 a share against EPS of $6.67, or just under 19 times earnings. Not spared from the recession, FedEx earned $3.67 for its most recent fiscal year ended May 2009. Analysts estimate FedEx will earn $4.11 in fiscal 2011 and in a normal economy anywhere from $7 to $9 share as a result of a leaner operating structure and increased market share.

The Ultimate Question
Of course the million dollar question is when and if we will see a normal economy anytime soon. Recessions may officially end in a relatively short period of time, but their aftershocks can go on for years. Nonetheless, FedEx helps businesses and the economy function by facilitating the efficient transport of goods. Just like rails are important to things like coal and grains, FedEx is critical to the transport of documents, packages and business inventory. Such items will naturally go through periods of declining volume, but as with any cycle, usually improve over time. That improvement should translate into increased profit for FedEx and reward long-term investors.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    Will WYNN Continue to Rally?

    Wynn Resorts has experienced a rally recently. Will it remain a good bet?
  2. Stock Analysis

    Don't Be Fooled by the Market's Recent Rally

    The bulls won for a bit in early October, but will bears have the last laugh?
  3. Stock Analysis

    Will Twitter's Stock Find its Wings Soon?

    Twitter is an enigma to many investors, but its story is pretty straightforward.
  4. Investing

    Warren Buffett and the Media Industry

    While most people believe traditional media is dead, Warren Buffett sees an opportunity.
  5. Stock Analysis

    8 Solid Utility Stocks for a Bear Market

    If you're seeking modest appreciation, generous dividend payments and resiliency, consider these eight utility stocks.
  6. Stock Analysis

    Why Phillips 66 (PSX) is a Solid Long-Term Bet

    Here's why Phillips 66 will likely remain one of the world’s largest and most profitable companies for a long time to come.
  7. Stock Analysis

    This is What Bill Gates's Portfolio Looks Like

    Find out about the stocks Bill Gates has in his portfolio. Learn about the close personal and business relationship Gates has with Warren Buffett.
  8. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  9. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  10. Stock Analysis

    Is Pepsi (PEP) Still a Safe Bet?

    PepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
  1. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!