Companies that are the best in their industry deserve a premium valuation, but investors in AMERCO (NASDAQ:UHAL) do not have to pay up at its current market price. AMERCO (NASDAQ:UHAL)’s main business, AMERCO (NASDAQ:UHAL), is the largest of its kind in North America. In a business where scale is as important as brand, AMERCO (NASDAQ:UHAL)’s leadership on both qualities makes it a valuable asset for shareholders.
Best in the business
As a result of using its scale to scoop up additional market share, U-Haul has achieved a 50% share of the market in North America, compared to only 20% for Avis Budget Group Inc. (NASDAQ:CAR) and Penske Automotive Group, Inc. (NYSE:PAG) — combined.
But what is really impressive about U-Haul is how it got to be so dominant. Back in the 1980s, Ryder (now a subsidiary of Avis Budget Group Inc. (NASDAQ:CAR)) was a formidable competitor. In fact, competition from Ryder was so fierce that AMERCO started investing in completely separate businesses as a way to diversify away from the crumbling do-it-yourself equipment rental business.
Luckily, current Chief Executive Officer Joe Shoen wrestled the company away from his father and deftly navigated the company through a series of acquisitions and changes in strategy that enabled the company to stymie Ryder’s attack. U-Haul has been extremely sensitive to market share grabs by competitors ever since, which has encouraged its two closest competitors to back out of the market.
For instance, Ryder accounts for only 6% of Avis Budget Group Inc. (NASDAQ:CAR)’s total revenue and does not receive management’s full attention. Avis Budget Group Inc. (NASDAQ:CAR)’s golden goose is its car rental business, which receives most of the capital expenditure allocation. For example, the company announced its acquisition of Zipcar, which fits in better with the car rental business than the do-it-yourself equipment rental business.
As a result of Ryder’s lowly status within the firm, Avis Budget Group Inc. (NASDAQ:CAR)’s management announced its intention to wind the business down over the next several years. Given U-Haul’s penchant for grabbing market share, it seems likely that the market leader stands to benefit most from Ryder’s demise.