Inside Wall Street: As Construction Revives, So Is This Equipment Renter's Stock

Here's a little-noted barometer for gauging the economic recovery: the volume of rental activity for industrial and nonresidential construction equipment. That measure is now showing a rebound that's gaining more traction every day.

That's because gear-rental companies are usually among the early beneficiaries of a recovery, and one company that has proved the maxim to be true is RSC Holdings (RRR), the second-largest equipment-rental company in North America. Its business -- and its stock -- have been gaining smartly.

When the economic downturn got rougher last year, shares of companies related in any way to construction -- including those in commercial or heavy industrial sectors -- got clobbered and driven to their lows. RSC sank to a low of $5.99 a share in early March 2010. That's when I highlighted RSC in this column -- after it fell -- on Mar. 3, 2010, pointing out that the company was surely a turnaround candidate because it would be a big beneficiary when industrial production and construction activity picked up along with the recovery.

"Picking Up Steam"

Like clockwork, as evidence of a renewal started piling up last year, RSC was among the first to reflect that rebound, in its sales and earnings. And in its stock price. RSC shares have more than doubled from the lows, closing around $13.30 on Feb. 22, down some 3.5% for the day as the entire stock market took it on chin, thanks to escalating violence in Libya and other Mideast hotspots. Some analysts say the stock has just started to readjust its worth and could climb more. Investment bank UBS analyst Henry Kirn was one of the analysts who boosted his 12-month price target on the stock, to $20 a share from $15.

"Rental trends are picking up steam, and pricing has come back to life," notes Vance H. Edelson, analyst at Morgan Stanley. He says the company's recent fourth-quarter results were "very strong" and consistent with the outlook provided on Jan. 13. Indeed, the annual growth in rental services was the highest for any fourth quarter since 2005, and year-to-year changes have just recently turned positive, notes the analyst.

RSC rents out a diversified line of heavy equipment -- from backhoes and forklifts to air compressors, aerial platform booms, and generators -- to industrial and nonresidential construction customers. During the recession, RSC took the opportunity of preparing for the down cycle's end and the onset of a recovery by cutting costs and investing in new equipment.

"RSC is a well-run rental company that executed on its business plan through the downturn, generating substantial free cash flow and significantly reducing debt," Edelson points out. The company is now gaining from the rebound in demand and the rise in utilization rates.

"We maintain our overweight rating on this best-in-class equipment rental company that's now benefiting from the cyclical [economic] improvement," says Edelson.

Renting Rather Than Buying

RSC President and CEO Erik Olsson exudes optimism about the company's prospects this year and next. Sales growth suffered in 2009, but it started rebounding in 2010, he notes. "For 2011, we see significant volume growth starting in the second half of the year, as demand continues to pick up and pricing stays firm," forecasts Olsson.

Part of what's driving up business, he says, is the increasing number of industrial and commercial companies that are switching to renting instead of buying their own equipment. The incentive for doing so is the significant cost-savings. That's basically the reason why the trend toward outsourcing rather than keeping and storing a huge inventory of heavy equipment and supplies has caught on, says Olsson. He estimates that renting equipment results in savings of as much as 22% in the first six months of the rental period.

RSC posted a loss of 71 cents a share in 2010 on revenues of $1.23 billion, but analysts are now upbeat and expect the company to be back in the black starting this year.

"All arrows seem to be pointing in the right direction as RSC enters 2011," says David J. Manthey, analyst at investment firm Robert W. Baird. With volume trends strengthening and its customers increasingly renting rather than buying equipment, the company is well positioned for a multi-year upturn, says the analyst.

So, Manthey expects RSC to start making money in 2011, and he estimates it should earn15 cents a share on revenues of $1.48 billion. For 2012, he forecasts a big leap in earnings and sales, to 57 cents on revenues of $1.61 billion. "RSC remains our top idea, and we believe investors should build positions to benefit from the expected multi-year expansion," Manthey advises.

Early to Invest

Analyst Scott Schneeberger of investment firm Oppenheimer says tangible signs in pricing and leading indicators suggest a turn in the nonresidential construction cycle. He rates RSC as outperform, in part because of implications of double-digit 2011 rental volume growth and incremental margins of 60% to 70% in RSC's earnings before interest, taxes, depreciation and amortization (EBITDA).

Interestingly, RSC is still a less known investment play not only on the upturn in industrial and commercial construction but in the economic recovery, which continues to increasingly gain the confidence of both investors and the business community. One large institutional investor that has been early to buy shares is Fairholme Capital Management, which has accumulated a 14.5% stake.

Investors looking to get in on an overlooked recovery play might want to join the prescient strategists at Fairholme.

View all Articles » Gene Marcial now writes the "Inside Wall Street" column for DailyFinance; it previously ran for 28 years on BusinessWeek. Before joining BusinessWeek, Marcial wrote the columns "Heard on the Street" and "Abreast of the Market" for The Wall Street Journal. He is the author of Gene Marcial's 7 Commandments of Stock Investing (FT Press, 2008).

Read More

View the original article here

Hilary Kramer: This Education Stock Is a Diamond in the Rough

A great university, but an even better stock. Why? American Public University System (APUS), wholly owned by American Public Education, Inc. (APEI), makes a strong case for leadership in its segment by providing online programs to address critical challenges in higher education. As America faces the dual challenges of reining in crippling tuition costs while significantly increasing the number of college graduates receiving a quality education, APUS has found a business model that seems to accomplish both goals.

During the February 17th shareholder call with APEI, I was again impressed with management's credible commitment to expanding access to affordable, quality education, which should benefit students as well as shareholders. The school continues to invest in academics, and is a recognized segment leader in both the measurement and reporting of student learning outcomes. At the same time, they have held undergraduate tuition flat for a decade and also provided an undergraduate book grant, while public four year institutions have increased the cost of attendance by roughly 49%, according to the American Council on Education. That emphasis on "cost containment" alone is certainly worthy of attention.

In common with many other online universities, APUS is leveraging today's technology to expand access to education, particularly for adult and other non-traditional learners; however, APUS in contrast seems to have avoided some of the pitfalls that have brought government scrutiny to many of its peers in the "for profit" category, such as providing misleading recruiting information or burdening students with excessive debt, with questionable academic results. One of the things that helps to set APUS apart is its heritage and culture of being customer driven, and agility in quickly responding to changing market needs, coupled with management's focus on managing for long term results.

No Short Shrift for APUS

For those who are more discerning about the differences among institutions, rather than grouping all players within the "for profit" or online sectors together by default, don't give APUS short shrift. And, in particular, I think it is incumbent upon policy makers to take a second look. As government spending continues to spiral out of control, it is encouraging to see that there is a market-based model that is actually a tax paying institution, rather than a government supported institution, helping to address one of our national priorities -- universal education

But why am I so impressed with APUS as opposed to the other online or" tax-paying" (aka "for profit") options? It starts with the company's roots.

APUS was founded with a strong vision for the future. By having successfully focused on educating military students first, and then, extending their pacesetting academic programs and accessible educational model to a broader array of public service professionals and working adults, APUS has adroitly defined just what it means to offer a quality product at an affordable price. Ever true to the needs and culture of their military constituency, APUS offers students both affordability and flexibility across a number of degree programs that, I expect, will continue to attract a growing number of military and civilian students, especially during this period of high economic uncertainty.

In terms of student value, often brick-and-mortar colleges devote significant student resources to campus upkeep, athletic programs, other cultural activities as well as to academic research. But at many online universities like APUS, resources are focused on academics and teaching students. These schools can hire outstanding faculty members from around the world, many of whom have real-life experience in the fields they are teaching, and reinvest resources directly back into maximizing student value.

As a market driven institution, APUS and some other institutions in this "tax paying" sector can respond more readily to the changing needs of their constituents, than can a traditional institution bound by bureaucracy and tenured faculty.

APUS has evolved over the years. Apart from just educating military applicants, the school now also serves other public service professionals, including police officers, firefighters, emergency management professional and national security personnel, among others. Today, the university offers 79 master's, bachelors', and associate degree programs, as well as certificate programs, to more than 83,000 working adults.

Partnership with Walmart

APUS partnered with Walmart (WMT) to make their degrees more applicable to the Walmart associates' educational needs. APUS developed a retail management concentration toward an Associate's Degree or Bachelor of Arts, Management program. APUS added courses such as Retail Strategy and Retail Innovation and combined them with existing offerings such as Supply Chain Management to create a relevant and focused concentration. This is a good example of the agility of these types of institutions, to respond to current educational needs of today's workforce.

And because keeping costs low is critical in serving the military -- who have tuition reimbursement limits -- APUS has not raised undergraduate tuition in a decade. This also benefits the many other civilian and public service students, reducing the likelihood that they will take on too much debt -- another critical issue facing higher education. In fact, the annual cost for a full time undergraduate -- including tuition, fees and course materials -- is 8% less at APUS than the average in-state levels at public universities.

The school attracts students primarily through referrals, which helps it maintain a very high student satisfaction rate. More than 90% of alumni surveyed would recommend the school to family, friends or coworkers. And according to CEO Wallace Boston, "More than 40% of our graduates return for a second degree." These metrics clearly illustrate that APUS alumni were pleased with their university experience, and that they recognize the value and quality of the academic programs.

I am confident that the company's earnings will continue to grow. Well-informed investors should pay attention to quality private-sector colleges and universities like APUS.

12-month price target: $50.

Hilary Kramer is the editor of GameChangerStocks.com, a newsletter that features stocks that Kramer believes have unusually good opportunities ahead.

View the original article here

3 Stock Trading Myths Busted

Feb 12, 2011 |Comments: 0 |

The stock market can be a scary place for some people. In fact, for the general public its a no-go zone and something that is generally seen as a place where people lose money. Whenever there is a stock market crash the media jumps all over it because they like to report on the doom and gloom of the world. If you look at the history of the stock market you can see that its been one of the most stable and most profitable investments you can make.

For the most part the common ideas about the stock market is nothing but myth. Its false ideas that's been started by people who don't really know anything about it anyway. Then there is also the myths amongst traders themselves and there are a lot of novice traders who are gripped by fear - which prevents them from reaching the level of success they could. Lets quickly look at 3 of these myths and bust them wide open.

1. You need a lot of money to invest in stocks

Not true. In theory you can invest in the stock market with $10 but its not really practical or wise to do that. Its more more realistic to have at least $1000 to start with. You can give that to a broker to buy stocks for you or you can open your own online trading account and buy and sell shares yourself. You will need a minimum of $1000 to open a trading account and then you can invest as much or as little as you want.

2. The stock market is risky.

Not true. Although there is a lot of risks, its not really all that different form any other type of investment. All investments carry some level of risk and the risk-reward principle is in play at all times. To say that its the stock market itself that is risky is just plain wrong. Instead, its people's investment decisions that are risky. The market is just the market. What you do in the market is up to you entirely.

3. You need "big hits" to make a lot of money.

Not true - although most novice traders seem to live by this idea. Think of it this way: would you take a 20% return on $100,000 or would you take a 200% return on $1000? Making money on the stock market is all about consistent profits and not about going after that one trade that will make you rich. It rarely happens.

Want to learn how to identify the best stock to buy? See my blog and learn more about day trading strategies that work...

Retrieved from "http://www.articlesbase.com/finance-articles/3-stock-trading-myths-busted-4219910.html"

View the original article here

Penny Stock Prophet Pros And Cons

Feb 12, 2011 |Comments: 0 |

The Penny Stock Prophet——another tool for you to make wealth. Grab A Copy Click here Do you have this time when you come across an opportunity and felt upset because you have no idea whether it is the chance of a lifetime or a disaster waiting to happen. In the case of Penny Stock Prophet, you don't need to be worried. Not everyone can be lucky, but with Penny Stock Prophet, you don't have to be.
There are many lively examples can prove this. James Connelly created a algorithm to analyze the trend of the stock market quotation, and in very shortly time he made a big discovery. Grab A Copy Click here First he only told his secret to his family and friends so they could acquire a great profit. The key of Connelly's discovery is how to identify the most critical moment: when should buy or sold your stock. It is a difficult decision for everyone, but don't worry anymore. Resort the Penny Stock Prophet to get the help you need!
By providing the stork recommendation and automatic alarm signal, the client can through the first hand information make the right decision.
Maybe you are worried that Penny Stock Prophet won't work for you. Never fear, the money back guaranty can give you confidence?As we know, the stock market is always changing. Once you miss an opportunity, it is gone forever! Penny Stock Prophet's alarm system will make sure you never miss that opportunity and achieve your financial dreams.

Grab A Copy Click here

Retrieved from "http://www.articlesbase.com/finance-articles/penny-stock-prophet-pros-and-cons-4217769.html"

View the original article here

Steelers vs. Packers Super Bowl Match-Up Is Good News for Stock Market

For investors who are hard-core football fans, checking out what the so-called "Super Bowl indicator" says about future stock market performance can add a bit of extra entertainment value to the game. While no one advocates aligning your investment strategy with an analysis of market returns that's based on Super Bowl outcomes, the exercise can add to fans' sense of pride. After all, what could be better than your team taking home the coveted Lombardy Trophy, and getting a bit of credit for a stock market rally, too? (But remember, these stats were generated in fun.)

This year, the match-up between the Pittsburgh Steelers and Green Bay Packers forecasts a strong bull market in 2011 no matter which team wins. However, a high scoring victory by the Pittsburgh Steelers may produce the highest returns of all. According to financial data and analytics firm Capital IQ, the average annual return for the S&P 500 index after a Steelers victory has been 26%. The Steelers have won the Super Bowl a record six times, and even when they lost Super Bowl XXX in 1996, the market returned 23%.

Capital IQ says the Packers are equally lucky for the markets. The average return after a Packers victory has been 23%, and even during the two years the Packers played in the Super Bowl and lost, the average market return was 29%. Those calculations suggest that whichever team wins the markets for 2011 are likely to be in the 23% range.

Sponsored Links Based on the numbers, investors should also hope for a high-scoring contest. Market returns have tended to trend higher as the total number of points scored during the game rises. Analysts from Schaeffer's Investment Research split the 44 Super Bowl contests into four groups of 11 each and charted the average return when the total points scored fell within a particular range. The S&P 500 Index performed best when the total number of points scored in the Super Bowl has ranged between 55 and 75, boasting an average gain of 16.63%. By contrast, market returns averaged 12.57% when the total points scored ranged between 45 and 54; 3.02% when the total points scored ranged between 37 and 45 and -0.71% when the total points scored ranged between 21 and 36.

"Maybe the higher scores put traders in a good mood," joked quantitative analyst Rocky White, who worked on Schaffer's research with Elizabeth Harrow.

Although a high-scoring offensive battle won by the Pittsburgh Steelers seems like the scenario that would produce the best market outcome, no matter which team you root for on Super Bowl Sunday, all investors will be rooting for higher market returns.