Five Rental and Leasing Companies Hedge Funds Are Bullish On

Rental and leasing companies rent various equipment and products to consumers and businesses. Items that are usually rented out include cars, aircraft engines, heavy equipment and an array of other products. Rental and leasing companies are somewhat similar to real estate investment trusts, which buy properties, collect rent checks from tenants and then pass on the rent to investors in the form of dividends. For that reason, rental and leasing stocks are usually sporting dividend yields above average relative to the broader market. As for car rental companies in particular, car-sharing services such as Uber and Lyft are bringing disruption to the transportation industry. Having this in mind, let’s have a look at five rental and leasing companies favored by the hedge funds tracked by Insider Monkey.

At Insider Monkey, we track around 770 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

#5. Ehi Car Services Ltd (ADR) (NYSE:EHIC)

– Number of investors with long positions as of March 31: 5

– Aggregate value of investors’ holdings as of March 31: $170.90 Million

There were five hedge funds followed by Insider Monkey with equity investments in Ehi Car Services Ltd (ADR) (NYSE:EHIC) at the end of the March quarter, down from seven recorded at the end of the December quarter. Nonetheless, the aggregate value of those investments rose by 52% year-over-year to $170.90 million even though Ehi’s American Depositary Shares dropped 1% in the first quarter. The five hedge funds invested in Ehi Car Services amassed 20% of the company’s outstanding common stock. The provider of car rentals and car services in China has seen its market value decline by 21% since the beginning of 2016. Ehi Car Services, whose car rentals are offered in 151 cites, 217 train stations and 73 airports across China, recorded net revenues of $223.94 million in 2015, which increased by an impressive 70% year-over-year versus a growth rate of 50% recorded in 2014. The company’s first-quarter net revenues grew by 55.8% year-over-year to $71.4 million. Tiger Global Management, founded by Chase Coleman, owns 8.33 million ADSs of Ehi Car Services Ltd (ADR) (NYSE:EHIC) as of March 31.

#4. Ryder System Inc. (NYSE:R)

– Number of investors with long positions as of March 31: 21

– Aggregate value of investors’ holdings as of March 31: $293.92 Million

The number of asset managers from our system with long positions in Ryder System Inc. (NYSE:R) declined to 21 from 22 during the first quarter of 2016, whereas the dollar value of all those positions increased by 8% quarter-on-quarter to $293.92 million. The increase was mainly attributable to a gain of 15% in the value of Ryder shares, so hedge funds were running away from the company on aggregate. The shares of the trucking specialist have advanced 13% since the beginning of 2016. Ryder System, which mostly generates revenue by providing leasing, commercial rental and contract maintenance of trucks, tractors and trailers, reported total revenue of $1.63 billion for the first three months of 2016, which increased 4% year-over-year. The company’s bottom line increased by 6% year-over-year to $55.79 million. In February, Ryder System’s Board declared a quarterly cash dividend of $0.41 per share, which yields 2.55% annually. Alexander Mitchell’s Scopus Asset Management acquired a new stake of 656,900 shares of Ryder System Inc. (NYSE:R) during the first quarter.

#3. Avis Budget Group Inc. (NASDAQ:CAR)

– Number of investors with long positions as of March 31: 25

– Aggregate value of investors’ holdings as of March 31: $1.13 Billion

Avis Budget Group Inc. (NASDAQ:CAR) fell out of favor with the hedge funds followed by our team during the first three months of 2016, as the number of funds with stakes in the company fell to 25 from 33 quarter-over-quarter. Similarly, the overall value of those stakes plunged by 44% sequentially to $1.13 billion, partially due to a 25% drop in the value of Avis Budget shares. Approximately 43% of the company’s outstanding common stock was stockpiled by the hedge funds included in our database. The vehicle rental operator in North America, Europe, Australia, New Zealand and other locations has seen its shares spike 27% in the past month, mainly due to signs that pricing pressure that previously put significant weight on the rental-car company’s bottom line has been fading away. Even so, the stock is down 12% year-to-date due investor worries over an oversupply of vehicles in the industry that could put pressure on prices and earnings. Larry Robbins’ Glenview Capital was the owner of 8.30 million shares of Avis Budget Group Inc. (NASDAQ:CAR) at the end of March.

#2. AMERCO (NASDAQ:UHAL)

– Number of investors with long positions as of March 31: 28

– Aggregate value of investors’ holdings as of March 31: $287.64 Million

AMERCO (NASDAQ:UHAL) has received some love from the elite segment of the entire hedge fund industry tracked by Insider Monkey, as the number of money managers from our database with long positions in the company climbed to 28 from 23 during the January-to-March period. Nevertheless, the aggregate value of all those positions shrunk by 6% quarter-over-quarter to $287.64 million, primarily due to a drop of 8% in the value of AMERCO shares. The parent company of U-Haul, the industry leader in the do-it-yourself moving and storage industry, has seen its market value drop 6% since the beginning of the year. AMERCO’s total revenues for fiscal 2016 that ended March 31 were $3.28 billion, up from $3.07 billion recorded in fiscal 2015, $2.84 billion in fiscal 2014 and $2.56 billion in fiscal 2013. While AMERCO does not solely operate in the moving and storage industry, this business accounts for more than 90% of the company’s annual revenues. Cliff Asness’ AQR Capital Management reported owning 122,121 shares of AMERCO (NASDAQ:UHAL) in its latest 13F filing.

#1. Hertz Global Holdings Inc. (NYSE:HTZ)

– Number of investors with long positions as of March 31: 47

– Aggregate value of investors’ holdings as of March 31: $1.79 Billion

Hertz Global Holdings Inc. (NYSE:HTZ) lost some appeal among the asset managers followed by Insider Monkey during the first three months of 2016, with the number of managers invested in the company dropping to 47 from 52 quarter-over-quarter. Correspondingly, the dollar value of those managers’ equity investments in Hertz fell by 28% sequentially to $1.79 billion, mainly because of a 26% decline in the value of Hertz shares. The 47 money managers invested in the car-rental company amassed 40% of the company’s total number of outstanding shares. Earlier this month, the vehicle-rental giant’s boardroom formally approved the previously-announced split of its car-rental and equipment-rental businesses. Initially announced in March 2014, the separation is set to be completed on the last day of this month. Shares of Hertz have declined 23% thus far in 2016. According to a freshly-amended 13D filing, billionaire investor Carl Icahn’s Icahn Capital LP owns 64.69 million shares of Hertz Global Holdings Inc. (NYSE:HTZ), up from 63.71 million shares owned at the end of December.

Disclosure: None