Think United Rentals, Union Pacific for Ways to Exploit Market Trends for Profit

NEW YORK (TheStreet) -- There was finally some evidence last week that the market is rewarding some trends in the market. Yes, there are still some opportunities out there for investors in this market and some trends to exploit. Here are a few.

Equipment Rental

One of the names I have been talking about is United Rentals (URI), which is the largest equipment rental company in the world. The company offers approximately 3,100 classes of equipment for rent from back hoes to water pumps. It operates 832 rental locations in the U.S. and Canada.

United Rentals has a great business model benefiting from improvement in the construction cycle. It has about a 13% market share of construction and industrial equipment rentals in North America. Recovering from a sluggish economy, companies are choosing to rent equipment rather than buy, which is helping drive higher rental rates, more rental business, and higher time utilization of rental equipment.

URI Chart
URI
data by YCharts

United Rentals broke out to new highs last week.

Data from Best Stocks Now App

But as you can see, this stock has been a long-time outperformer.

Data from Best Stocks Now App

But the shares continue to trade at a big discount to their expected growth rate with a forward P/E of only 13.

Domestic Oil Boom

Another stock that is working well in this market is Continental Resources (CLR). This name also broke out to new highs. Continental Resources is an oil and gas exploration company and the #1 leaseholder in the Bakken region, which is at the forefront of America's domestic oil boom.

CLR Chart
CLR
data by YCharts

I featured Continental Resources in my book Best Stocks Now back in February 2011 and the stock is up 124% since then.

The company, led by billionaire oilman Harold Hamm, has recently caused quite a stir by filing for a permit from the U.S. government to export oil. While the U.S. still has a shortage of heavy crude, it actually has a surplus of light sweet crude. There has been a ban on U.S. companies exporting oil since the oil embargo of 1975.

This is going to be an interesting story to watch going forward as our country moves closer toward energy independence. I predict leading energy stocks will replace biotech this year as the place to be in this market.

Railroads Are Working

The Transportation sector has been one of the leading sectors this year and the railroads have been a big part of this move. One of my favorite railroad names is Union Pacific (UNP), another company breaking out to new highs!

UNP Chart
UNP
data by YCharts

Union Pacific serves the fastest growing population centers in the Midwest and West Coast regions. It also connects with Canada's rail systems and is the only railroad serving all six major Mexico gateways. This geographic advantage has helped it maintain pricing power and lock in more profitable contracts.

Union Pacific is an economic recovery play, but it is also a beneficiary of the domestic oil boom in this country. We don't have enough pipelines here in the U.S. which has led many oil producers to transport their products the old fashioned way, via rail.

More Energy Beneficiaries

These same positive trends in the Energy sector are creating opportunities for Canadian rail stocks such as Canadian National Rail (CNI) and Canadian oil stocks like Canadian Natural Resources (CNQ). Top quality Energy Service names are also moving higher in this market. Two names I own in this industry group are Halliburton (HAL) and Schlumberger (SLB).

And Don't Forget India!

While there are finally some trends to exploit in the U.S. market, another trend that has been working outside the U.S. is the India story. The new pro-business regime in India and the prospect of economic reform has created tremendous opportunities for this market. In the absence of direct investment in India companies, there are many other ways to capture exposure to this market trend such as (INP).

INP Chart
INP
data by YCharts

Finally several trends have emerged this year for investors to exploit in this market. So even though the DOW is up just 2% year to date, there are some great opportunities in this seemingly trendless market if you are looking in the right places.

At the time of publication the author was long URI, CLR, UNP, CNI, CNQ, HAL, SLB and INP.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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