McGrath isn’t as popular among hedge funds as the previous two we’ve discussed, but Chuck Royce’s hedge fund Royce & Associates was holding 291,300 shares in 3Q 2012 based on their latest 13F filing. Additionally, David Dreman’s hedge fund, Dreman Value Management, keeps about 0.1% of their portfolio in McGrath (see David Dreman’s favorite stock picks).
One interesting fact about these two hedge funds is that both employ a value based investing approach when selecting stocks. Although McGrath Rentcorp makes a very small portion of both hedge funds’ portfolios, it looks like these two billionaires believe this stock is undervalued.
Up fourth is Ryder System, Inc. (NYSE:R):
Ryder System, a diversified rental business, operates in three segments: Supply Chain Solutions, Dedicated Contract Carriage, and Fleet Management Solutions. Through these segments, Ryder Systems offers leasing, contract maintenance, and commercial rental of tractors, trucks and trailers in addition to other vehicles. They even provide drivers for vehicles. Interestingly, Ryder also offers supply chain consulting solutions to their customers in addition to distribution management, IT and engineering solutions, and various other support services. Their stock is up about 1.6% since the beginning of 2011.
Like McGrath, Ryder System is another of David Dreman’s holdings. Unlike McGrath, Ryder almost makes Dreman’s top 50 holdings, coming in 57th, making up almost .7% of his portfolio.
Last but certainly not least, we’ll discuss United Rentals, Inc. (NYSE:URI):
United Rentals is a well-known equipment rental business that rents and sells over 3,300 different classes of equipment to customers. The company’s equipment is used by construction and industrial businesses, utilities, homeowners, government entities and manufacturers. Shares of URI are up over 124% since the start of 2011, beating the rest of its aforementioned peers quite considerably. With compounded annual revenue growth of nearly 6% from 2008-2012 and EBITDA growth of nearly 40% per year from 2010-2012, this stock definitely has our attention and it’s no surprise shareholders have been well rewarded.
Paul Tanico’s hedge fund Castlerock Asset Management keeps 8.33% of its portfolio in United Rentals, while Sean Cullinan’s Point State Capital holds $97 million or roughly 1.62% of his portfolio in the stock. Point State Capital is the largest reported hedge fund holder of URI as of 3Q 2012. Of the players mentioned here, United Rentals is the most popular rental company among the hedge funds we track, and considering it’s actually up over 1,900% from 2008 lows, this doesn’t surprise us the least.
In conclusion, we have some good rental stocks to choose from. But overall, United Rentals looks like the best choice for investors right now. Not only do they have solid financials and excellent stock performance in both the past year and recent years, but they are a very popular stock in the smart money’s circles. With 6 consecutive quarterly earnings beats, this rental company looks like it’s ready to continue making fresh highs in 2013.
Disclosure: I hold no positions in any of the stocks mentioned in this article
