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Geetanjali Gamel's  Instablog

Geetanjali Gamel
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I am an individual, self-taught investor with a Masters in Economics. I like playing with data and mostly focus on finding companies that are undervalued and provide good opportunities for investment, but at times will also look into high growth companies with compelling stories despite their... More
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TheValueSurfer
  • UHAL – A Stock For All Seasons 0 comments
    Jul 24, 2013 2:14 PM | about stocks: UHAL

    A confessed bargain hunter I try to pick stocks the same way I shop for anything else - I skim through piles of junk on the clearance rack to find the odd high quality item that unexpectedly ended up there. So when I looked at Amerco earlier this year I was excited by the investment opportunity and intrigued by the lack of analyst coverage. The company operates in the moving and self-storage industry through its well-known subsidiary UHAL and is also a player in the insurance market for life, property and casualty insurance.

    A great thing about Amerco is that its products and services are simple to understand. Most of us have probably used a UHAL moving truck or van in our lives. The company has built up a brand that has a wider recognition than any of its competitors. Its moving and self-storage business offers resilience through short term business cycles as well as long term structural/demographic change.

    When the economy is doing well, job opportunities tend to grow across the country and labor force mobility is not impeded by houses that will not sell. In that case, people tend to move for better employment opportunities, or move to newer, bigger homes as their personal finances improve. Alternatively, on the wrong end of the business cycle people may face job losses and foreclosures and move to smaller homes using storage for belongings that no longer fit into the new, smaller spaces. The common denominator in these contrasting situations is a moving truck and a storage space.

    In terms of growth opportunities through long term structural change, Amerco could gain from the changing demographic of the nation. According to the Census Bureau the percentage of population aged 65 and over is expected to nearly double from 43.1 million in 2012 to 92 million in 2060. As the population ages and empty-nesters downsize to smaller homes and eventually to assisted living facilities, moving and storage are services that are likely to be in demand.

    Amerco's Q4 2013 earnings call highlighted a gain of 5% in full year revenue over the prior period in their equipment rental revenues which is the core of their Moving and Storage segment. The company remains committed to growing its business by adding distribution points, expanding its fleet of vehicles and increasing its self-storage locations as well as improving occupancy of existing units. The operating margin shows a long term growth trend and the P/E ratio indicates a good value relative to direct competitors. Although the debt to equity ratio in a business like Amerco that has large capital investment and maintenance expenses tends to be relatively higher, its overall long term trend has shown a decline. In terms of stock price, the 20, 50 and 200 day moving averages have all been trending upward, and I read 70% of shares being held by insiders and 5% owners as a vote of confidence in the company.

    Overall I think Amerco is a good addition to the portfolio of any long-term investor who is seeking a company with a strong business model, opportunity for growth and long term resilience through economic volatility.

    Disclosure: I am long UHAL.

    Additional disclosure: I am a self taught individual investor and this article expresses my views based on my own research. I am not being influenced or paid by any organization to write this article.

    Themes: UHAL storage moving Stocks: UHAL
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