United Rentals (URI)

Now at 15x earnings, still 20% discount to market. When a stock price rises, ideally you want the multiple to stay the same. It would mean organic growth matches price appreciation, both moving forward at the same time. With a dramatic move in price, ask yourself if you still want to hold? 

Economically sensitive. Be careful. Don't want to own it into a recession. Deep recession would hurt. Market seems on solid economic ground, so he's holding. If it gets too big in the portfolio, he'll trim. Still likes it. 

Look at the background. Companies like this live on government spending. US government's passing all kinds of bills to support the economy, like CHIPS and Infrastructure, to the tune of $2T. URI will get a big piece of this money.

Quality company. Suffered a while ago due to worries of recession. Cyclical, as people only rent when they have a lot of confidence in projects. Recovered because people are seeing the end of the hiking cycle, economy continues to be strong. Low multiple with high growth rates, a great combination.

URI had a better-than-expected 2023 outlook and started its first dividend. Brokers have raised target prices. 
There have been some recessionary and demand concerns, and the sector has been very weak in the past two weeks, but at 8X earnings things look fine to us here. 
Outlook is supported by strong demand due to significant federal spending programs and large industrial projects. 
Amid slowing economic growth, URI is poised to sustain double-digit gains in 2023. 
Annual 2022 equipment revenue expansion of 23% was the highest in the past decade. 
In the quarter, General Rental gains of 19% outpaced Specialty's 18%, as large rental companies continue to significantly outperform the market. Adjusted Ebitda margin in 4Q expanded 280 bps to 50%, highest since 3Q18. 
Ample free cash flow supports a long-awaited dividend and share buybacks for a total 2023 outlay of $1.4 billion. 
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Traded off on recession worries, where projects on the books would be deferred, but this is temporary. Solid investment, less than 9x earnings, inexpensive. Consistent grower. Initiated first-ever dividend, shows confidence in future cashflow.

Initiated a dividend, and the chart shows that the market likes this. A very worthwhile hold.

vs. Caterpillar They're both cyclicals. He owns only URI. CAT stock is a little ahead of itself at 25-30x this year's earnings. URI is trading at a lower level. URI will still do well if a US infrastructure bill will be passed. Yes, it's lumpy and volatile, so strategically limit your exposure to this in your portfolio. Diversify away from higher-beta, riskier stocks.