This morning we are adding AMERCO (UHAL) to our Long Bias list, and will be doing a Black Book presentation on the company next Thursday, 9/9. More to come obviously, but this will be a fun one and very different:
- UHAL is not a REIT, but given its significant presence and ownership of self-storage the company is (1) very relevant to our broader coverage and (2) there has been significant client interest and demand for coverage
- There is currently zero sell-side analyst coverage of the company other than Hedgeye, which always presents an opportunity
- UHAL is a very different animal than we are used to covering - the company is an aggregation of a number of businesses, namely U-Haul self-storage, U-Haul moving and storage equipment rentals, and finally property & casualty (Repwest) and life (Oxford) insurance. We spent a decent amount of time thinking about how to attack the story, and fortunately the way the company reports segments allows for the effective separation of the insurance subsidiaries into a single equity in earnings line in the financial statements, thereby isolating the moving and storage businesses which are the bulk of annual earnings contribution. So in effect we are going to follow the "80/20 rule" and focus on the stable and growing self-storage business with over 500 owned locations and additional revenue from third-party management, as well as the more cyclical / volatile equipment rental business. There are other idiosyncrasies, such as no same store portfolio reporting and no dividend payout, and the company obviously pays corporate income taxes as it is a c-corp and not a REIT
- We like the name as a long here after checking Keith's signals, and from a macro perspective UHAL historically has been great in Quads 1 & 2 and decent in Quad 4. Interestingly, the performance track record has been phenomenal in a shallow Quad 4. The only reasons UHAL is not on our Best Ideas list are (1) unique risks from its additional business lines, particularly the equipment rental business and (2) the relative opacity of the company versus other self-storage REITs. The reality, though, is self-storage remains a long here
Figure 1: Hedgeye REITs Position Monitor
Figure 2: UHAL GIP Quad Backtest
Please call or e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
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