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Urbanites Driving Profits for Avis, Hertz and Ryder

Stocks in this article: SBY AMH CAR HTZ R ARPI

The easy money has been made, noted Zell. Buying a foreclosed home is purchasing a property that the previous owners could not sell or rent out. It also means the lending institutions could not sell it to cover the balance of the mortgage. If there are loads of foreclosures in a neighborhood, that is about as bearish an indicator as there is in real estate investing in a given region. A foreclosure is not exactly a blue chip piece of real estate. It has been cast off and unwanted at many different levels by many different parties.

What should be more rewarding is to invest in car and truck rental companies such as Avis Budget (CAR), Hertz Global Holdings (HTZ) and Ryder System (R).

City residents are less likely to own personal motor vehicles due to the hassles. It is much easier and much cheaper to rent rather than deal with parking, tickets, taxes and the myriad of other factors that make owning a car in the city such an ordeal. Urban living is better when renting from Avis, Hertz or Ryder and simply tossing them the keys when the ride is no longer needed (make sure the tank is full when returning it, of course).

Living has certainly been better for the shareholders of these companies than those for Silver Bay Realty Trust, American Homes 4 Rent, and American Residential Properties.

For 2013, Avis Budget's stock price is up more than 80%. Contributing to that has been quarterly sales growth of more than 10%. Hertz Global Holdings has risen more than 50% this year with quarterly sales growth of 22%. For Ryder Systems, the stock price has increased over 40% with quarterly sales growth of nearly 4%.

A recent survey by the Urban Land Institute found that nearly 40% of respondents age 18 to 34 plan to live in a city. That is significantly higher than for other groups. These are the residents who will be renting or buying first homes. More likely than not, the increase will carry over for both renting homes and renting cars and trucks well into the future.

At the time of publication, the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Jonathan Yates is a financial writer who has had thousands of articles appear in periodicals and Web sites such as TheStreet, Newsweek, The Washington Post and many others. Much of his career was spent working on Capitol Hill for Members of Congress in both the House and Senate, on both committee and personal staff.  He was also General Counsel for a publicly traded corporation.  He has degrees from Harvard University, Georgetown University Law Center and The Johns Hopkins University.
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