Today's 11 O'Clock Stock: UPS

Welcome to "11 O'Clock Stock." Here at Fool.com, we'll be finding a new great stock at 11 a.m. ET every weekday for 50 days. Better yet, we're so confident in the picks that we're investing $50,000 of the Fool's own money in them! To hear more about the series, click here to see a video from Motley Fool co-founder Tom Gardner. Can't make it at 11 a.m. ET? Come back to Fool.com, and we'll have the article in our Top Stories section 24 hours a day.

Around the office, I'm known as a guy who likes wide moats priced at no-moat prices. Unfortunately, undervalued blue chips don't exactly rain from the heavens. Occasionally, though, they show up in boxes. Enter the world's largest package delivery company, United Parcel Service (NYSE: UPS). And while UPS ships more than 15 million packages a day to customers across 200 countries and territories, today's lone special package has your name all over it.

Fast facts on UPS

Source: Capital IQ, a division of Standard & Poor's. TTM is trailing 12 months.

Break out the white board
Let's play a game. Describe to me a perfect anchor stock in your portfolio. You're obviously in the market for a durable competitive advantage, right? UPS offers that in spades, operating alongside rival FedEx (NYSE: FDX) as one of the select few global shippers capable of getting a package from Point A to Point B quickly, cheaply, and profitably. Barriers to entry in the shipping business are massive and will only continue to heighten as these aspiring duopolists grow their massive networks and scale advantages over time.

You're probably looking for a solid dividend. I assume a 2.8%-yielding payout that has grown at nearly 9% annually over the past half-decade will do, yes? Good.

Stability? UPS' shares are less volatile than the broader market thanks to a conservative balance sheet and the couple billion it pulls in annually in free cash flow.

Growth? Absolutely. UPS should be able to grow its top line thanks to the rising tide of global trade in the years ahead. Not only that, but the company should be able to quietly muscle through progressively higher price increases as barriers to entry in the shipping industry rise.

Insider ownership? I think you're getting a little greedy on that one considering we're talking about blue chips, but UPS still features an enviable owner-operator culture as a legacy of its 1999 IPO. I love when customer-facing employees are stockholders, which is frequently the case at UPS.

What Brown can do for you
I think UPS' shares are worth about $71 a share, making for a few bucks worth of upside at recent prices. No, that's not flashy, but the prospects of a post-recessionary bounce and a growing 2.8%-yielding payout ought to tug at the heartstrings of just about any conservative long-term investor.

There are risks, of course, with a key obvious one being a double-dip recession that could seriously dent UPS' profits. Another key risk is UPS' susceptibility to high oil prices thanks to its fuel-guzzling fleets of trucks and planes. That risk can be nicely hedged against, though, with a complementary position in a fellow undervalued blue chip: ExxonMobil (NYSE: XOM). Exxon and UPS are far from negatively correlated, but one stock's loss should show up as the other's relative gain as oil zigs and zags.

The Foolish bottom line
UPS is a conservative business built to last for the very long haul. Its massive network makes for huge barriers to entry and sturdy profits that should easily trend upward over time. Tack on some upside with a 2.8% yield, and you're looking at a strong, rest-easy long-term winner. That is what Brown can do for you.

Come back to Fool.com Monday for another great stock pick. There's plenty more great stock advice, and you can find video of each day's recommendation as well! To see the performance of previous recommendations, click here.

The Motley Fool will wait at least 24 hours after this publication before buying shares of UPS. To see an FAQ on "11 O'Clock Stock," click here.