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Not everyone stays in the same place for their entire life. If you don’t you have to move. When you decide to move, you can do two things. You can hire the movers, or you can do it yourself. If you do it yourself, you usually end up looking like one of those idiots on the highway trying to drive one of those big orange trucks with no idea how to actually do it, moving from lane to lane.
You know what I’m talking about, right? Why? Because every day you go out on the road, you see a U-HAUL truck or trailer. Did that ever make you think that, “Hey, someone is paying money to rent those things.”? Well it makes me think that.
Today I bought stock in Amerco (UHAL) at 225.70. I will sell it in 4 to 6 weeks at 262.49. Here’s why I like UHAL:
First of all, look at the chart:
This stock, with the bargain basement PE of 13.5 is up 93% in the last 12 months and it is doing it with a Return on Equity of 24% and an Operating Margin of 22%. That’s really good.
AMERCO operates as a do-it-yourself moving and storage operator for household and commercial goods in the United States and Canada. Its Moving and Storage segment engages in the rental of trucks, trailers, portable storage boxes, specialty rental items, and self-storage spaces primarily to the household movers; and sale of moving supplies, towing accessories, and propane. This segment also provides eMove, an online marketplace that connects consumers to independent Moving Help service providers and independent self-storage affiliates; auto transport and tow dolly options to transport vehicles; and specialty boxes for dishes, computers, and sensitive electronic equipments, as well as tapes, security locks, and packing supplies. This segment rents its trucks and trailers, as well as offers self-storage rooms through a network of approximately 1,490 company operated retail moving centers and 16,400 independent U-Haul dealers. As of March 31, 2013, this segment had a rental fleet of approximately 112,000 trucks, 90,000 trailers, and 34,000 towing devices. This segment operates 1,180 self-storage locations with approximately 445,000 rentable rooms comprising 40.0 million square feet of rentable storage space.
AMERCO was founded in 1945 and is based in Reno, Nevada. It was created by Leonard Shoen and his wife Anna. When Leonard returned home from the war, he wanted to move his family from Los Angeles to Portland but realized that there wasn’t a company that would allow him to do it himself and drop off the equipment at the destination city. Building a network of intercity locations was his genius which had never really been duplicated. By signing up franchisees over time, he built up the company without deploying much of his own capital. It was incredible effort of passion, tenacity and salesmanship.
Now you have over 18,000 U-HAUL locations in North America compared to only 13,000 Starbucks locations. They have a fleet of 200,000 trailers and trucks and they have tacked on self-storage locations all over the place as a natural extension of the demand for do it yourself intercity moving. Amerco’s competitive advantage has moved past the tipping point and they are essentially the Amazon.com or Facebook of the do it yourself moving industry. It’s too late for anyone else to try to build the network or branding goodwill that U-Haul has. That gives them incredible pricing power. Many have tried to get in on their business, but they fail time after time. Now they have more than 9x as many hubs as their nearest competitor – game set and match.
Amerco has successfully grown its revenues each and every year since 2009. More impressive has been its earnings growth in each of its last five fiscal years:
2009 $0.02/share
2010 $2.72/share
2011 $8.78/share
2012 $11.73/share
2013 $13.56/share
Even with this stellar earnings trend, AMERCO trades at a 13.5x price-to-earnings ratio, which is well under the S&P 500's 19.7 price-to-earnings multiple. Given its considerable earnings power and rock solid asset value, one would think that AMERCO deserves a market multiple. If you just take the 2013 earnings of $13.56/ share and multiply it by the market PE of 19.7, you get a share price of $267.13 which is just past my target price. What, you think I make this stuff up?
In addition to it’s the orange vehicles, AMERCO also owns a lot of real estate in the form of self storage facilities. AMERCO’s self storage business generates over 25% of their EBITDA. This real estate value most likely will continue to grow, so as people pay the rent, AMERCO pays down their debt which makes their balance sheet get fatter and fatter. This ridiculous asset base makes this stock very safe. Also, if UHAL wants to go the pure play route, they could spin off the storage facilities into a REIT which would reward the existing UHAL shareholders immeasurably.
AMERCO frustrates the crap out of the ANAL-ysts because they provide no earnings guidance and has little research coverage. So the ANAL-ysts are all faceful because they actually have to do some work to figure out how much this stock is really worth. However, the bottom line is that AMERCO has resumed its share buybacks and special dividends, which means they are very confident about their cash prospects and their business. Even a 9 year old should be able to figure that out. You don’t need an MBA from Wharton, although it’s nice to have (particularly at Christmas parties when you slurp up Johnny Walker Blue for free).
The current CEO is Joe Shoen, son of founder Leonard Shoen, and he has run UHAL since 1986 which means he isn’t one of these trust fund clowns who are going to run the company into the ground. It’s a labor of love for him and clearly he’s been a capable leader for the long haul (pardon the pun).
The US moving industry is a $10 billion dollar business, almost have of it is do it yourself movers. With Amerco at around $2 billion in revenue, that means there is a lot more pie to be eaten. Amerco has the network in place. It cannot be defeated. The only thing left for them to do is grow. The size of their platform is key. If someone wants to move, and a competitor doesn’t have a truck or trailer on the weekend that they want to move in the market they want to move from, that means they aren’t a competitor. Availability is the key. People don’t move every day, so they really aren’t that price sensitive for this one time expense. They just want to do it right and do it conveniently. The only alternative in some cases is borrowing your buddy’s truck but you can’t do that because who is going to bring the truck back?
The trend in Amerco’s financial performance is the only indication I need that these guys are winning…and winning big. It’s a snowball effect. The bigger these guys get, the less significant their competition gets and thus the competitive advantage accelerates. With all of the business that Amerco has already captured, they are able to establish consumer trends with data that none of their competitors have. It’s like beating up your little brother every day. This improves their reservation systems, their truck deployment, the quality of investment decisions and on and on. The scale that they have and the cross selling of their services is a winning and almost indestructible business strategy.
Remember, it’s all about earnings earnings earnings. Back in November, UHAL reported net earnings available to common shareholders for its second quarter ended September 30, 2013, of $138 million, or $7.06 per share, compared with net earnings of $109.4 million, or $5.61 per share, for the same period last year.
For the six-month period ended September 30, 2013, net earnings available to common shareholders were $251 million, or $12.84 per share compared with net earnings of $190 million, or $9.74 per share, for the same period last year.
This earnings growth is crazy.
"Our efforts to improve convenience for our customers through the addition of new company operated locations and independent dealers along with an expanded fleet of trucks and trailers has resulted in continued revenue growth," stated Joe Shoen, chairman of AMERCO.
Highlights of Second Quarter Fiscal 2014 Results:
“Self-moving equipment rental revenues increased $60.6 million or 11% during the second quarter of fiscal 2014, compared with the second quarter of fiscal 2013 on continued growth in moving transactions. Continued expansion of the rental fleet, incremental improvements in utilization and additional retail locations are enabling us to serve more customers.
Self-storage revenues increased $7.6 million during the second quarter of fiscal 2014, compared with the second quarter of fiscal 2013. We are increasing both the number of rooms rented through acquisitions and by improving occupancy at existing locations. Over the last twelve months we have added approximately 2.2 million net rentable square feet to our owned self-storage portfolio.
Operating earnings at our Moving and Storage operating segment increased $38.3 million in the second quarter of fiscal 2014 compared with the same period last year. Total revenues climbed $96.6 million.
Amerco's valuation is cheap. Yet its business is stronger than it has ever been. I like that combination and I think fairly soon I’ll be able to back up the U-HAUL trailer and fill it with the cash I made from this investment.
So…how do you like UHAL? More importantly, how did you like this write up?
I am HUGE!
$$$MR. MARKET$$$
You know what I’m talking about, right? Why? Because every day you go out on the road, you see a U-HAUL truck or trailer. Did that ever make you think that, “Hey, someone is paying money to rent those things.”? Well it makes me think that.
Today I bought stock in Amerco (UHAL) at 225.70. I will sell it in 4 to 6 weeks at 262.49. Here’s why I like UHAL:
First of all, look at the chart:
This stock, with the bargain basement PE of 13.5 is up 93% in the last 12 months and it is doing it with a Return on Equity of 24% and an Operating Margin of 22%. That’s really good.
AMERCO operates as a do-it-yourself moving and storage operator for household and commercial goods in the United States and Canada. Its Moving and Storage segment engages in the rental of trucks, trailers, portable storage boxes, specialty rental items, and self-storage spaces primarily to the household movers; and sale of moving supplies, towing accessories, and propane. This segment also provides eMove, an online marketplace that connects consumers to independent Moving Help service providers and independent self-storage affiliates; auto transport and tow dolly options to transport vehicles; and specialty boxes for dishes, computers, and sensitive electronic equipments, as well as tapes, security locks, and packing supplies. This segment rents its trucks and trailers, as well as offers self-storage rooms through a network of approximately 1,490 company operated retail moving centers and 16,400 independent U-Haul dealers. As of March 31, 2013, this segment had a rental fleet of approximately 112,000 trucks, 90,000 trailers, and 34,000 towing devices. This segment operates 1,180 self-storage locations with approximately 445,000 rentable rooms comprising 40.0 million square feet of rentable storage space.
AMERCO was founded in 1945 and is based in Reno, Nevada. It was created by Leonard Shoen and his wife Anna. When Leonard returned home from the war, he wanted to move his family from Los Angeles to Portland but realized that there wasn’t a company that would allow him to do it himself and drop off the equipment at the destination city. Building a network of intercity locations was his genius which had never really been duplicated. By signing up franchisees over time, he built up the company without deploying much of his own capital. It was incredible effort of passion, tenacity and salesmanship.
Now you have over 18,000 U-HAUL locations in North America compared to only 13,000 Starbucks locations. They have a fleet of 200,000 trailers and trucks and they have tacked on self-storage locations all over the place as a natural extension of the demand for do it yourself intercity moving. Amerco’s competitive advantage has moved past the tipping point and they are essentially the Amazon.com or Facebook of the do it yourself moving industry. It’s too late for anyone else to try to build the network or branding goodwill that U-Haul has. That gives them incredible pricing power. Many have tried to get in on their business, but they fail time after time. Now they have more than 9x as many hubs as their nearest competitor – game set and match.
Amerco has successfully grown its revenues each and every year since 2009. More impressive has been its earnings growth in each of its last five fiscal years:
2009 $0.02/share
2010 $2.72/share
2011 $8.78/share
2012 $11.73/share
2013 $13.56/share
Even with this stellar earnings trend, AMERCO trades at a 13.5x price-to-earnings ratio, which is well under the S&P 500's 19.7 price-to-earnings multiple. Given its considerable earnings power and rock solid asset value, one would think that AMERCO deserves a market multiple. If you just take the 2013 earnings of $13.56/ share and multiply it by the market PE of 19.7, you get a share price of $267.13 which is just past my target price. What, you think I make this stuff up?
In addition to it’s the orange vehicles, AMERCO also owns a lot of real estate in the form of self storage facilities. AMERCO’s self storage business generates over 25% of their EBITDA. This real estate value most likely will continue to grow, so as people pay the rent, AMERCO pays down their debt which makes their balance sheet get fatter and fatter. This ridiculous asset base makes this stock very safe. Also, if UHAL wants to go the pure play route, they could spin off the storage facilities into a REIT which would reward the existing UHAL shareholders immeasurably.
AMERCO frustrates the crap out of the ANAL-ysts because they provide no earnings guidance and has little research coverage. So the ANAL-ysts are all faceful because they actually have to do some work to figure out how much this stock is really worth. However, the bottom line is that AMERCO has resumed its share buybacks and special dividends, which means they are very confident about their cash prospects and their business. Even a 9 year old should be able to figure that out. You don’t need an MBA from Wharton, although it’s nice to have (particularly at Christmas parties when you slurp up Johnny Walker Blue for free).
The current CEO is Joe Shoen, son of founder Leonard Shoen, and he has run UHAL since 1986 which means he isn’t one of these trust fund clowns who are going to run the company into the ground. It’s a labor of love for him and clearly he’s been a capable leader for the long haul (pardon the pun).
The US moving industry is a $10 billion dollar business, almost have of it is do it yourself movers. With Amerco at around $2 billion in revenue, that means there is a lot more pie to be eaten. Amerco has the network in place. It cannot be defeated. The only thing left for them to do is grow. The size of their platform is key. If someone wants to move, and a competitor doesn’t have a truck or trailer on the weekend that they want to move in the market they want to move from, that means they aren’t a competitor. Availability is the key. People don’t move every day, so they really aren’t that price sensitive for this one time expense. They just want to do it right and do it conveniently. The only alternative in some cases is borrowing your buddy’s truck but you can’t do that because who is going to bring the truck back?
The trend in Amerco’s financial performance is the only indication I need that these guys are winning…and winning big. It’s a snowball effect. The bigger these guys get, the less significant their competition gets and thus the competitive advantage accelerates. With all of the business that Amerco has already captured, they are able to establish consumer trends with data that none of their competitors have. It’s like beating up your little brother every day. This improves their reservation systems, their truck deployment, the quality of investment decisions and on and on. The scale that they have and the cross selling of their services is a winning and almost indestructible business strategy.
Remember, it’s all about earnings earnings earnings. Back in November, UHAL reported net earnings available to common shareholders for its second quarter ended September 30, 2013, of $138 million, or $7.06 per share, compared with net earnings of $109.4 million, or $5.61 per share, for the same period last year.
For the six-month period ended September 30, 2013, net earnings available to common shareholders were $251 million, or $12.84 per share compared with net earnings of $190 million, or $9.74 per share, for the same period last year.
This earnings growth is crazy.
"Our efforts to improve convenience for our customers through the addition of new company operated locations and independent dealers along with an expanded fleet of trucks and trailers has resulted in continued revenue growth," stated Joe Shoen, chairman of AMERCO.
Highlights of Second Quarter Fiscal 2014 Results:
“Self-moving equipment rental revenues increased $60.6 million or 11% during the second quarter of fiscal 2014, compared with the second quarter of fiscal 2013 on continued growth in moving transactions. Continued expansion of the rental fleet, incremental improvements in utilization and additional retail locations are enabling us to serve more customers.
Self-storage revenues increased $7.6 million during the second quarter of fiscal 2014, compared with the second quarter of fiscal 2013. We are increasing both the number of rooms rented through acquisitions and by improving occupancy at existing locations. Over the last twelve months we have added approximately 2.2 million net rentable square feet to our owned self-storage portfolio.
Operating earnings at our Moving and Storage operating segment increased $38.3 million in the second quarter of fiscal 2014 compared with the same period last year. Total revenues climbed $96.6 million.
Amerco's valuation is cheap. Yet its business is stronger than it has ever been. I like that combination and I think fairly soon I’ll be able to back up the U-HAUL trailer and fill it with the cash I made from this investment.
So…how do you like UHAL? More importantly, how did you like this write up?
I am HUGE!
$$$MR. MARKET$$$
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