U.S. Immigration Business: According to data from financial firm Morningstar, in the recent quarter, 28 funds from companies such as T. Rowe
Price, Lord Abbett, and Royce
Capital have added Stamps.com to their portfolios, representing a 250% increase compared to the previous quarter. The number of fund shareholders in Pitney
Bowes, founded in 1920, has also increased by 30%.
The fund managers indicated that they are optimistic about these e-commerce providers not only due to the growth of companies like Amazon, eBay, and Etsy, but also because of the U.S. Postal Service's declining business.
In the second quarter, the number of packages delivered by the U.S. Postal Service increased by 14.4%, while standard mail volume decreased by 2.1%. After a round of mergers and acquisitions over the past 12 months, both Stamps.com and Pitney Bowes have become the largest authorized resellers of the U.S. Postal Service, able to produce and print official postage. Therefore, if the U.S. Postal Service indeed cuts service points in rural areas as planned, these two companies are most likely to benefit. They can also offer delivery services from companies like FedEx and UPS.
Jim Harvey, a fund manager at Royce Funds, stated that given the potential reduction in U.S. Postal Service outlets and Stamps.com's acquisition of the online delivery software company ShipStation last year, "I believe Stamps.com is stronger than ever before." Since Stamps.com went public in 1999, Royce Funds has frequently appeared on the company's shareholder list but has also periodically sold off its shares, only to re-increase its position earlier this year.
Of course, Stamps.com is not without risks; a key concern is the company's over-reliance on Amazon. Although the company has not disclosed exactly how much of its revenue is related to Amazon, analysts believe the proportion is certainly high.
The company set a record for its performance in the first quarter, propelling its stock up 46% year-to-date, with a price-to-earnings ratio of 41 times, approximately double that of the S&P 500 index.
In comparison, during the same period, Amazon's stock price increased by 71%, but due to the company's lack of profitability over the past 12 months, the price-to-earnings ratio cannot be calculated. Amazon closed at $537.01 on Wednesday, up 73% year-to-date.
Widespread Penetration of E-commerce
The driving force behind the e-commerce market is not just Amazon. The former founder of Diapers.com created Jet.com this July, aiming to challenge Amazon through local business delivery. Meanwhile, Macy's is experimenting with same-day delivery services in major cities, including San Francisco and Chicago.
Market research firm Forrester Research estimates that e-commerce currently accounts for about 10% of total U.S. retail, projected to grow by 43% over the next five years, reaching $480 billion. Although stock prices of some e-commerce-related companies have declined, fund companies are still actively increasing their holdings.
Sonoco Products and International Paper are the two largest box companies in the U.S., and according to Morningstar, the number of funds that have included these two companies in their portfolios for the first time increased by 20% over the past quarter.
Sonoco Products currently has a price-to-earnings ratio of only 15.4 times, below the market average, and its stock has fallen by 5.4% this year. International Paper has a price-to-earnings ratio of 21 times, slightly above the market average, and its stock has decreased by 10.6% this year, partly due to a global sell-off of stocks related to commodity companies.
During the same period, Pitney Bowes' stock price fell by 16%, primarily because its rapidly growing e-commerce business still cannot compensate for the decline in traditional postage revenue.
Bryant Van Cronkhite, the fund manager at Wells Fargo, stated that the decline in Pitney Bowes' stock price, combined with the company's price-to-earnings ratio of only 10.4 times, attracted him to increase his holdings in the stock earlier this year.
He noted that the market is overly focused on the decline of their mail business, neglecting the reality that they are significantly expanding new business.
In May of this year, Pitney Bowes spent $395 million to acquire Borderfree, a company that provides international sales services to retailers, offering multi-currency settlement and customs clearance services.
Cronkhite remarked that this stock is worth buying because it can help them expand a channel that serves both Etsy and retail businesses worldwide.
He added, "The company is undergoing a three-year revival plan, during which they plan to focus more on digital sectors, which are the current growth points of the economy."