Rental Stocks: Which is Number One? – Rent-A-Center Inc (RCII), United Rentals, Inc. (URI)

Page 1 of 2

The rental business is a very diverse and unique segment of the economy.  People and businesses rent everything from televisions and video cameras to nail guns, bulldozers, semi-trucks and cars.  Generally speaking, people tend to rent items they need whether or not there is a recession.  After all, most rentals are used to perform an essential, but temporary task.  Sure, there are instances where renting is done more out of a want than a need, but you’ll find more construction companies renting and leasing trucks than individuals borrowing Ferraris.

United Rentals, Inc. (NYSE:URI)

This article reviews five rental companies, plus we at Insider Monkey will glance at what some hedge funds have been doing with their holdings. Tracking hedge funds’ stock picks by looking at their recent 13F filings can help the average investor generate serious outperformance (Check out Insider Monkey’s market winning-strategy here).

First, let’s look at Rent-A-Center Inc (NASDAQ:RCII):

Rent-A-Center is the largest rent-to-own store chain in North America.  As of 2011 they operated an estimated 47% of all rent-to-own stores in the United States and Canada.  Recent years’ financial results show that after 3 years of slightly negative revenue growth, the company experienced revenue increases in 2010 and 2011 of 6% and .12% respectively.  Additionally, Rent-A-Center’s net income has grown since 2007 by a compounded rate of over 20% due to lower interest payments, resulting from reductions in long-term debt. Their stock, however, is down a little over 8.5% since the beginning of 2011.

Roberto Mignone, the manager of Bridger Management, reported third quarter 13F holdings of 525,000 shares (see Roberto Mignone’s top stock picks).  Rent-A-Center represents 1.32% of his portfolio and is his 28th largest holding.  The largest fund holding comes from Adage Capital Management, reporting 1.75 million shares held in 3Q 2012 after increasing their stake in the company by 35%.  Adage Capital typically beats the S&P 500 by an average of 4.5%.

Next, let’s check out Aaron’s, Inc. (NYSE:AAN):

Aarons is one of Rent-A-Center’s main competitors, specializing in leasing and retail sale of various consumer electronic, household appliance, residential furniture and other accessories.  Aaron’s stock is up over 9.5% since the start of 2011 and has compounded annual revenue growth of almost 8% since 2007, with revenue increasing steadily each year.  One thing that sticks out on Aaron’s balance sheet is an increase in long-term debt from an average of approximately $51 million over the prior four years up to $141.61 million as of 3Q 2012.  This isn’t too concerning, though, considering they have over $1 billion in current assets.

Mark Travis’s hedge fund, Intrepid Capital Management, keeps 2.21% of his portfolio in Aaron’s, placing this stock in his top 20 holdings.  Intrepid focuses mostly on the financial, services and technology sectors, and Aaron’s positioning indicates a very bullish vote of confidence from this hedge fund.

Third, we will discuss McGrath Rentcorp (NASDAQ:MGRC):

McGrath Rentcorp is a business-to-business rental company that focuses on renting and selling modular buildings, electronic test equipment, and liquid and solid containment tanks and boxes.  Since 2007, McGrath has grown annual revenue at a compounded rate of over 5%, while growing their bottom line by almost 4%.  The company’s stock is trading roughly around the same price as its opening price in 2011, which was around $29.78.

Which hedgies are invested in the company?

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!