Driven by a surge in e-commerce, low interest rates and accommodative Federal Reserve policy, this stock surged over 46% higher in 2013.

#-ad_banner-#But at the start of 2014, the company suffered a reversal of fortune. Word of a weaker-than-expected Christmas season, combined with profit-taking, sent shares tumbling. An earnings warning from the company accelerated the selling.

The selling intensified despite the company’s strong fundamentals, incredible $10 billion stock repurchase plan and solid dividend. Shares have plunged nearly 8% since the selling began.

The selling resulted in many investors panicking or avoiding the stock completely. While this reaction is understandable, it is the exact opposite of what savvy investors do.

Although sell-offs are often harbingers of worse things to come, they’re also often great opportunities to purchase shares at a discount. This is particularly true when the stock’s fundamentals are strong and the selling is an overreaction to short-term bad news. 

I think that’s the case here — and investors should buy rather than sell shares of package delivery giant United Parcel Service (NYSE: UPS), which is setting up to be an incredibly discounted buy candidate. 

A nearly $93 billion company that posted revenue of nearly $55 billion and more than $40 billion in gross profit in its most recent fiscal year, UPS combines the logistics technology of traditional delivery systems with the ever-growing e-commerce sector. Until “Star Trek”-like teleportation is possible, e-commerce will have to rely on delivery services such as UPS to deliver products to customers.   

	Flickr/Jeremy Vandel
	UPS delivered more than 31 million packages on Dec. 23 — the highest-volume day in company history. To handle this soaring demand, UPS hired 85,000 temporary workers.

UPS was loud and clear about the reasons for its warning on earnings. The company said an “unprecedented” amount of online shopping forced it to hire additional workers to handle the demand. In addition, difficult weather conditions around Christmas drove up delivery costs. (My colleague Marshall Hargrave recently looked at how the holiday season affected UPS rival FedEx (NYSE: FDX).)

It’s unbelievable to me that investors focused on the negative of missing forecasts rather than UPS’ bullish reasoning. Demand is so high that the company has been forced to spend more than expected to meet consumers’ delivery needs. I can’t think of any better news for the long run — yet some nervous, shortsighted investors saw it as a reason to sell shares. 

To put UPS’ holiday volume in perspective, the company delivered more than 31 million packages on Dec. 23 alone — the highest-volume day in company history by a full 13%. To handle this soaring demand, UPS hired 85,000 temporary workers, 30,000 more than expected.

What this tells me is UPS has the systems and procedures in place to manage nearly any amount of demand. Clearly, there were issues that resulted in some packages being delayed, but this should result in UPS developing cost-effective ways to improve performance during demand spikes.

Add in the fact that UPS expects diluted earnings to grow by 10% to 15% this year (which is in line with long-term growth targets), and you have a great buying opportunity developing.

Risks to Consider: All delivery companies are closely tied to economic growth, expansion and consumer sentiment. Happy consumers in a growing economy mean more purchases that need to be delivered, but the opposite is also true. In addition, UPS faces stiff competition from FedEx and the U.S. Postal Service. Technological advances, such as the drone delivery vehicles being designed by Amazon.com (Nasdaq: AMZN), may also cause risks for UPS’ bottom line. Be sure to use stop-loss orders and diversify when investing. 

Action to Take –> There is no question in my mind that UPS’ monster $10 billion stock repurchase plan, its solid dividend yield of 2.5%, and positive outlook for the future makes the current sell-off an incredible opportunity to purchase shares at a discount. 

The question is, when is the right time to buy? The smartest course of action is to wait until the price starts climbing higher. This is because it’s impossible to tell how long the irrational selling will continue. Waiting for a higher close increases the odds that the selling is over and the buying will continue. Right now, my plan is to buy shares after the first close above $101, with a 12-month target of $109. 

P.S. If UPS’ combination of fundamentals, dividend and buybacks appeals to you, you’ll want to see the special research project my colleague Nathan Slaughter is working on. In short, Nathan’s report shows how investors can use a strategy we call “Total Yield” to capture the highest returns with the least amount of risk by combining the three ways companies return value to shareholders. To get a free copy of this report — and the names and ticker symbols of some of the highest “Total Yield” stocks on the market — click here now.