Why United Rentals Stock Has More Room to Run

The market continues its path upward even after an attempted insurrection in Washington D.C. and dual Democratic Senatorial wins in Georgia. In the past, either one of those issues would likely cause the market to plunge. But we live in different times. 

While traders were initially positive on the prospect of gridlock in the government back in November, that optimism has carried over with a different result, as Democrats regained control of the White House, House of Representatives, and Senate. The market hates uncertainty, and the uncertainty we experience over the past two months is now over. 

Now that the elections behind us, the executive and congressional branches can get back to governing, which could result in additional stimulus measures. We could also see a bipartisan infrastructure plan, which is why I am recommending United Rentals Inc. (URI). But before I examine URI, let's take a look at the markets over the past few days.

Market Commentary

Aside from Monday, when the S&P fell in the morning, the first five trading days of 2021 have been relatively uneventful, considering what was happening outside the markets. On Wednesday, stocks ended the day mixed as the events of the Capitol transpired. The Dow Jones Industrials gained 400 points, hitting a new record closing high, the S&P 500 gained 0.6%, and the Nasdaq Composite Index finished lower. 

On Thursday, all three major indexes closed the day at new all-time highs as investor optimism for additional stimulus peaked after seeing results of two special runoff elections in Georgia in which both Democrats won their respective elections. All three major averages hit fresh new highs again today as investors weigh the potential for that additional stimulus. 

Market Outlook

While the market didn't get the divided government it was hoping for, it also didn't get as big of a "Blue Wave" as expected. With a 50/50 split, Democrats hold a majority advantage with Vice President-elect Kamala Harris's vote, but it isn't large enough to make significant changes. This was seen as a significant positive for the market, as evident by its continued climb.

In fact, I believe investors may have even grown tired of the gridlock. We could now see additional stimulus for the people that need it, including small business owners. This could lead to more robust economic growth, higher earnings, and higher stock prices. 

While there will still be significant differences between the two parties, we could see a series of bipartisan bills, including infrastructure legislation, that even President Trump would support. Our nation's infrastructure has been crumbling for some time, and it's an issue everyone can get behind. An infrastructure initiative could generate job growth and higher profits for companies in the construction industry. That's why I am so bullish on URI. 

United Rentals, Inc. (URI)

URI is the world's largest equipment rental company and mainly operates in the United States and Canada. It serves three end markets: general industrial, commercial construction, and residential construction. Surprisingly, URI's stock was up 39% last year, even in the midst of a downturn in construction.

That strong performance has continued into this year, mainly driven by its growth prospects under the new administration. I believe that should continue as the company is also benefiting from rising demand for specialty construction products, and its fleet productivity should return to normal levels this year. URI is also poised to benefit from an onshoring trend from U.S. manufacturers to eliminate pandemic-related supply chain issues.

The stock is rated a "Strong Buy" in our POWR Ratings system. It holds a grade of "A" in Trade Grade and Buy & Hold Grade, and a "B" in Industry Rank. Those are four of the components that make up the POWR Ratings. URI is also the #1 ranked stock in the Industrial-Services industry.

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URI shares . Year-to-date, URI has gained 12.18%, versus a 1.97% rise in the benchmark S&P 500 index during the same period.

David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a Consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers.

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