By Andrew Bary

Warren Buffett has helped popularize the idea of corporate moats, or durable competitive advantages. Few companies have a larger moat than U-Haul Holding, the dominant do-it-yourself moving company that has also built the country's No. 3 self-storage business over the past 20 years.

U-Haul's market share in moving is well over 50%. Its truck fleet totals nearly 200,000 vehicles, plus some 137,000 trailers that can be hooked up to private vehicles. Customers can rent U-Haul equipment from more than 23,000 U-Haul rental locations in all 50 states and Canada, putting 90% of the U.S. population within five miles of a U-Haul facility.

Despite its competitive advantages, U-Haul's stock has been a disappointment this year -- and in the past decade. But an expected resurgence in the company's profitability could enhance its appeal.

U-Haul's more-liquid nonvoting Class B shares, issued in 2022, now trade around $52, down nearly 20% this year despite recent strength in many housing-related stocks. The original voting Class A shares, at $57, are down 16% year to date and up 50% in the past 10 years, during which the S&P 500 index has tripled.

The stock doesn't appear cheap, with the nonvoting shares trading at 28 times the $1.89 a share the company earned in the fiscal year ended in March. Those earnings were down 40% year over year. Earnings fell 27%, to 73 cents a share, in the June quarter.

Investor Steve Galbraith of Kindred Capital in Darien, Conn., argues that U-Haul's earnings power is understated. He believes it can potentially earn $5 a share annually. That seems doable, as the company netted nearly $5 a share in fiscal 2022 on lower revenue.

Profits should rise as U-Haul works through the depreciation of trucks purchased several years ago. The company's chairman and president, Joe Shoen, has complained that the auto industry de-emphasized trucks powered by internal combustion engines in 2022 in their electric-vehicle push -- a trend that has now reversed.

"Auto makers attempted to subsidize the green-energy initiatives by overcharging for ICE vehicles. That crucified our industry," Shoen said at the company's virtual investor day in August, citing truck price increases as high as 60%. Those high-price vehicles are weighing on results due to increased depreciation expenses and depressed resale values.

Profits also should get a boost as newer self-storage facilities fill up. U-Haul has added about 10% annually to its storage footprint. Its occupancy rate is below 80%, compared with 90%-plus for publicly traded real estate investment trusts such as $Public Storage(PSA-N)$, Extra Space Storage, and CubeSmart.

Galbraith says the self-storage business, which generates just 25% of U-Haul's revenue, could be worth at least its entire market value of $10 billion. U-Haul has about $6.4 billion of net debt, but the moving business is likely worth considerably more than that. The company trades for just 1.3 times book value, with minimal intangible assets.

The storage operation's revenue is running at a rate of about $1 billion a year, in line with CubeSmart, which has an enterprise value (market value plus net debt) of $13 billion. U-Haul owns 70 million square feet of storage space, against 48 million for CubeSmart.

"U-Haul runs two symbiotic businesses," says Bill Smead, the lead manager of the Smead Value fund, which holds the stock.

Smead says the storage business is a "gold mine," with many facilities located on the same site as the truck-rental business. "Americans never throw anything away," he says.

U-Haul would be a ripe activist target if it weren't family-run and controlled. Shoen, 76, the chairman and president, has led the company since the late 1980s. He and his brother Mark control about 43% of the stock. Joe's father started the company in 1945, when it began renting trailers in the Pacific Northwest.

There are numerous steps management could take to boost the stock price. For one, U-Haul could pay a bigger dividend -- the current yield on the nonvoting shares is just 0.4%, and the voting stock doesn't pay a dividend. The company also could resume repurchasing shares, provide greater financial disclosure, and offer clear financial targets.

Part of the reason that U-Haul trades cheaply is the lack of capital return to shareholders, a contrast with storage REITs such as Public Storage that pay dividends of 4% or more.

U-Haul gets little attention on Wall Street. There is almost no analyst coverage, and there are no forward earnings estimates.

The company can point to impressive long-term returns, with the voting stock up 40-fold over the past 30 years. U-Haul focuses on customers, and one of its corporate principles is to "emphasize the strength of the company, not the strength of the stock price."

Splitting up the moving and storage businesses likely could create substantial value. Storage businesses tend to trade for 15 to 20 times annual Ebitda, or earnings before interest, taxes, depreciation, and amortization, compared with U-Haul's current 10 times Ebitda on what looks like depressed earnings.

Shoen and the company see considerable value in retaining both businesses, as so many storage facilities are located on the same property as truck-rental locations and many moving customers choose to store stuff.

U-Haul's stumbles in recent years have led to frustration in its investor base. On its annual investor day webcast in August, one questioner complained about the "dramatic underperformance" of the stock over the past 10 years. (It has returned 5% annually, against 15% a year for the S&P 500.) "Is the problem poor capital allocation, a weaker business model, or bad execution?" the questioner asked.

The questioner also wants better financial disclosure. U-Haul reports revenue separately for its moving and storage businesses, but not profits for each business, making it harder to evaluate them.

Shoen disputed what he called the "premise" of underperformance and said that the people most interested in U-Haul's financial disclosure are "our competitors." On buybacks, Shoen said he would "go back and talk to the board about this." He said he wasn't a buyback "guru," adding, "I'm not even sure I could calculate the real value of a stock buyback."

He noted that he was "flummoxed" by the price gap between the voting and nonvoting shares. The cheaper nonvoting shares look like the better way to invest in the company.

It is encouraging that management seems chastened by the weak stock performance. That suggests some investor-friendly changes could be coming, including better financial disclosure, a resumption of stock buybacks, and greater capital discipline.

The ultimate payoff could come if the Shoen family ever decides to sell U-Haul.

Berkshire Hathaway likely would be interested, Smead says. It's Berkshire's kind of business -- dominant, with understated profits.

Write to Andrew Bary at andrew.bary@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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September 05, 2025 14:11 ET (18:11 GMT)

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