Textainer Group Holdings Ltd. (NYSE: TGH)
Originally recommended on Nov. 23/09 (IWB #2942) at $15.68. Closed Friday at $27.42. (All currency in U.S. dollars.)
Textainer Group stock has made a big move since I recommended the shares last November at $15.68. Recently the Bermuda-based shipping company announced that total revenue for the last quarter increased by $20.1 million or 37% compared to the prior year. For the six months ended June 30, total revenue was $143.7 million, up $29.7 million or 26% compared to the prior year.
Earnings for the second quarter were $25.1 million (51c a share). For the first half of the fiscal year profit was $49.3 million ($1.01 per share). The directors approved a dividend increase of 4.2% to 25c a share, payable on Sept. 1.
All this helps to explain the run-up in the stock price, which has increased by 75% since my recommendation. Even at this level, the price is not out of line with a forward p/e ratio of 10.33 and a dividend yield of 3.6%, based on the latest increase.
This company is a good leading indicator for the economy since it leases freight containers to shipping lines worldwide. Textainer reported that average fleet utilization was 95.3% for the second quarter and stood at a record high of 98.6% on Aug. 12, up 10% from the end of 2009
If you believe that the economy is going to continue to improve and interest rates are going to stay low, this company is still a good bet and could climb to the $32 range by year-end. Having said that, if you got in when I recommended the stock last fall I would advise taking half-profits at this stage.
Action now: Take half profits of 75%.
Disclosure: Long TGH