Wedgewood Partners reported that United Rentals, Inc. shares detracted from its portfolio's third-quarter 2026 returns, even as the equipment rental firm posted accelerating growth driven by large-scale infrastructure projects. The investment management firm released its investor letter detailing these performance dynamics alongside its broader market outlook.
In the quarter, the Wedgewood Composite delivered a net return of 2.5%, outperforming the Standard & Poor's 500 Index at 2.3% and the Russell 1000 Growth Index at 0.9%, though trailing the Russell 1000 Value Index at 2.6%. Wedgewood Partners attributed broader market pressure to surging Treasury yields and macro headwinds that weighed on rate-sensitive stocks, while noting that AI resilience and mega-cap tech stocks pushed the NASDAQ 100 to record highs. Despite these pressures, the firm stated it is actively deploying capital into new positions, recently adding Toll Brothers, Hermès, and TJX Companies.
United Rentals, headquartered in Stamford, Connecticut, closed at $1,029.64 on October 16, 2026, with a market capitalization of $64.09 billion. The stock was up 27.22% year-to-date and traded within a 52-week range of $701.59 to $1,179.18. In its commentary, Wedgewood Partners noted that while United Rentals shares detracted from performance, the company's fundamental results were solid.
The firm highlighted that United Rentals' rental revenue and adjusted EBITDA both accelerated to 13% growth over the prior year. This growth was primarily driven by the Specialty rentals segment, where revenue increased by 25%, compared to a 7% rise in general rentals. Demand for this segment was fueled by large projects in data centers, power, infrastructure, and liquefied natural gas (LNG). Conversely, local projects, which are typically smaller but higher margin, experienced more muted growth in the low single digits.
Wedgewood Partners suggested that any easing in interest rates or a recovery in residential construction markets would help drive activity in these local markets and improve the company's margins. According to its database, 59 hedge fund portfolios held United Rentals at the end of the second quarter, down from 64 in the previous quarter. The firm noted that while it acknowledges the potential of United Rentals as an investment, it believes certain AI stocks offer greater upside potential and carry less downside risk.