As an investor, I tend to favor companies that are the best at what they do; I would hate to own a company that is only second-best or third-best in its industry. That is why I like AMERCO (NASDAQ:UHAL) — owner of U-Haul, North America’s largest do-it-yourself (DIY) equipment rental company. In addition to operating the lowest-cost truck rental company in the industry, AMERCO (NASDAQ:UHAL) also owns valuable real estate and has a Warren Buffett-like CEO who has substantially all of his net worth tied up in the company.
Feels good to be on top
U-Haul rents trucks and trailers, sells moving and packaging supplies, and also refills propane tanks. The company has the largest network of dealers and the largest fleet of rental trucks and trailers in North America — by a wide margin. This gives it a tremendous cost advantage by way of economies of scale.
U-Haul maintains a 50% share of the DIY equipment rental market; the next closest competitors — Penske Automotive Group, Inc. (NYSE:PAG) and Avis Budget Group Inc. (NASDAQ:CAR) — only have a 10% share each.
That was not always the case. Ryder — now owned by Budget — caused a lot of problems for U-Haul in the late ’80s/early ’90s. However, CEO Joe Shoen made a slew of prudent acquisitions and pricing decisions and eventually defeated the Ryder onslaught. U-Haul has remained vigilant against competitive threats and has maintained a strong lead in the industry for more than a decade.
Meanwhile, Budget and Penske Automotive Group, Inc. (NYSE:PAG) are more focused on other aspects of their businesses. Truck rentals account for only 6% of Avis Budget Group Inc. (NASDAQ:CAR)’s total revenue and the company plans to wind down the business over time. This is enabling U-Haul to pick up an even greater share of the market.
Penske Automotive Group, Inc. (NYSE:PAG) is also a half-hearted competitor. Penske’s truck rental segment is largely devoted to commercial trucks; the DIY equipment rental is a much smaller part of its business. Penske Automotive Group, Inc. (NYSE:PAG)’s real business is auto dealerships, and its real profit engine is parts and service revenue. DIY truck rental is almost an afterthought.
As a result of half-hearted competition, an enormous dealer network and fleet, and an ever-vigilant CEO, U-Haul is poised to remain on top for years to come.