Motley Fool: This stock can deliver
Shares of United Parcel Service (NYSE: UPS) were recently down 24% from their 52-week high, as the delivery company wrestled with higher labor costs and revenue headwinds. Second-quarter revenue was slightly down compared to the year-ago quarter, as more customers opted for lower-priced shipping services.
However, UPS is still a profitable business that pays an attractive dividend, recently yielding 5.1%.
The company is working through its challenging environment by identifying ways to trim costs. To counter its customers’ shift to lower-priced services, UPS is exploring other revenue opportunities. It’s looking to handle more packages from small businesses, and making pricing adjustments to improve its revenue per piece.
The second quarter showed a notable improvement in U.S. average daily volume, which grew for the first time in over two years.
The cost savings and pricing actions the company plans to take should improve profitability heading into next year.
This is a business built for the long run, with a big competitive advantage: Few companies can afford to invest the billions of dollars required to scale up a shipping network that can run as efficiently as UPS.
Long-term investors confident that people will keep buying items online to be delivered might want to take a closer look. (The Motley Fool recommends United Parcel Service.)
Ask the Fool
Q: Should I sell my loser stocks instead of waiting for them to recover? – B.R., Fort Wayne, Indiana
A: If a losing stock faces long-term problems, selling makes sense. Don’t think too much about how much you’re ahead or underwater on any given stock, though. Instead, figure out whether you’re confident that it can grow from here.
If you’re not, why hang on, when you can likely earn a better return elsewhere?
For example, if your shares of Scruffy’s Chicken Shack (ticker: BUKBUK) are underwater by $1,000 and you’ve lost faith in the company, sell them; move what you get for them into a more promising stock, where you’re more likely to earn that $1,000 back – and more.
Q: How should I, as a teen, invest my money? – P.B., Decatur, Georgia
A: Investors of all ages should only invest in stocks with money they won’t need for at least five, if not 10, years because you don’t want to have to sell just as the market crashes.
Short-term dollars (say, for college expenses) are best kept in safer places, such as CDs. (You can find good CD rates at TheAscent.com and Bankrate.com.)
For long-term wealth-building, it’s hard to beat the power of stocks, and teens have gobs of time for their money to grow.
If you invest $1,000 annually in an S&P 500 index fund and it grows at an annual average rate of 8%, it could be worth more than $120,000 in 30 years, when you’re in your 40s. Add to it aggressively over time, and you could retire early as a millionaire!
Learn more in “The Motley Fool Investment Guide for Teens” by David and Tom Gardner with Selena Maranjian (Touchstone, $18).
My Dumbest Investment
My most regrettable financial move was selling my shares of Tesla in 2013, after they roughly doubled in value from the previous year. – J.S., online
The Fool responds: Ouch. Tesla has split its stock twice since then – 5-for-1 in 2020 and 3-for-1 in 2022 – so when you adjust prices for that, shares spent much of 2012 in the $2 range.
Fast-forward to 2024, and they were recently trading near $214, up more than 100-fold since that 2012 level. If you’re invested in a company whose quality and growth prospects you believe in, it’s often best to hang on for a long time.
That said, if you thought the shares had gotten way ahead of themselves, selling was rational.
If you weren’t sure what you thought, you might have sold only some of your shares, retaining the rest. If your Tesla shares had grown to make up a big portion of your portfolio, selling at least some would also make sense, as it can be risky to have too many eggs in one basket.
This story doesn’t have to be over, though. If it’s still one of your most promising investment ideas, you can always buy shares again. If not, focus your money on those best ideas – or a simple S&P 500 index fund.