Portfolio Manager Randell A. Cain Jr. of Herndon Capital Management says United Rentals, Inc. (NYSE:URI) has had its stock maligned because of the company’s tie to the energy industry, but the potential for new infrastructure spending has brought the stock back up approximately 40%.
We own a company called United Rentals, which basically leases out equipment in a wide variety of more capital-intensive, heavier industrial type of industry groups. It’s not unusual to see industrial construction going on. If you look and see some of the cranes, it probably wouldn’t be unusual to see United Rentals let along the side.
For a while, the stock has been a bit malign because of this tie into the energy industries as oil prices are coming down, even though their energy aspect of the portfolio business only fell about 10%. When things go negative, the market tends to focus on the weakest denominator rather than looking at the company in whole in aggregate, and we do that.
We have a analyst on our team, Keith Buchanan, who has done a phenomenal job for us in making us smart about companies like this, and it came on our radar screen with the analysis and made a decision that this was a company that was being unjustifiably punished, and that it would, in saner times, did a very nice return, and that’s exactly what has happened.
This stock has gone up about 30%, 40% in a brief period of time as the market now has seen the potential for the infrastructure spending, which is right up the United Rentals’ alley. And so again, what one time is considered to be an anchor holding the valuation back — we are concerned about economy activity and energy in particular — now has started to turn and go in the other direction. And so that’s one company that we have brought to the portfolio not too terribly long ago.
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