The world economy is still suffering from the backlash of the 2008 financial meltdown, as well as facing other economic uncertainties. The British economy is worse now than it was in the great depression. China has been slowing down its massive growth, and Russia’s economy is experiencing similar slowdowns. Despite all of this bad news, Ibelieve that the worldeconomy is going to improve in the next few years. I’m a big fan of being greedy when others are fearful, and it seems that the IMF agrees with me. In the United states, unemploymentis finally starting to shrink, from 9.5% a year and a half ago to under 8% unemployed today. Likewise, with a slight blip at the end of 2012,GDP has continued torise, and the Consumer Confidence Index hascontinued to slowly risesince thefinancial meltdown of 2008. The consumer confidence index is trending upwards in other coutries as well, most notably China.
Expeditors International: The poster child of a well run company
Expeditors International of Washington (NASDAQ:EXPD) runs a large array of logistics services. They are hired by other companies to provide supply chain services, move things through different countries, customer customs, etc. Their customer base is very diverse, with 410 offices spread across six continents While other companies have grown through acquisition, Expediters has been laser focused on growing organically, decreasing margins, and training and retaining it’s workforce. It has no long term debt, good and constant cash flow, and, perhaps best of all, an excellent executive team with a sense of humor.
When investors look for an example of a well-run company, often the they turn to Expeditors. I first learned of Expediters was when I was reading commentary on Microsoft Corporation (NASDAQ:MSFT)’s acquisition of Skype for $8.5 billion, after eBay Inc (NASDAQ:EBAY) bought Skype for $2.6 billion seven years earlier. This letter in particular by Dan Ferris gives interesting comparisons in how the two companies treat capitol allocation. Likewise, I’d point investor’s to Jim Mueller’s great article on Expeditors when he bought some for his real money rising star portfolio.
Expeditors may be on a bit of a sale right now. The stock has shed about 10% of it’s value from a few weeks ago after the company reported it’s 2012 Q4 earnings. In the earnings statement Expeditors International of Washington (NASDAQ:EXPD) showed that, while revenue continued to rise from last year, they experienced a spike in the cost of Air freight faster than Expeditors could adjust their rates to compensate. Expeditors always looks expensive; after all, you are paying for the great management and business with a price to earnings ratio of around 25. But I believe this company will outperform the S&P over the next 5 years. I would recommend buying on a dip.
Perhaps a better option to buying stock outright would be to write slightly in the money puts. While I like the company, I don’t think Expeditors will shoot to the moon in the next few months. The $40 May 2013 put looks especially good, paying around $3. This would either give you the obligation to buy one hundred shares of Expeditors at the adjusted price of $37, or make about a 30% annualized gain on your capital at risk, depending on if Expeditors is above $40 or not in May.
