Hertz Global Holdings, Inc (HTZ): Are Hedge Funds Right About This Stock?

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.

Hertz Global Holdings, Inc (NYSE:HTZ) investors should pay attention to an increase in hedge fund sentiment lately. HTZ was in 43 hedge funds’ portfolios at the end of the third quarter of 2016. There were 38 hedge funds in our database with HTZ positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Morningstar, Inc. (NASDAQ:MORN), Regal Entertainment Group (NYSE:RGC), and Black Stone Minerals LP (NYSE:BSM) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

What does the smart money think about Hertz Global Holdings, Inc (NYSE:HTZ)?

At Q3’s end, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, up by 13% from one quarter earlier. On the other hand, there were a total of 52 hedge funds with a bullish position in HTZ at the beginning of this year. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Carl Icahn’s Icahn Capital LP has the biggest position in Hertz Global Holdings, Inc (NYSE:HTZ), worth close to $519.6 million, amounting to 2.6% of its total 13F portfolio. The second most bullish fund manager is Glenview Capital, led by Larry Robbins, holding a $265.2 million position; 1.9% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism encompass Jonathon Jacobson’s Highfields Capital Management, David Cohen and Harold Levy’s Iridian Asset Management and Karthik Sarma’s SRS Investment Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now, key money managers were breaking ground themselves. Tourbillon Capital Partners, led by Jason Karp, created the most valuable position in Hertz Global Holdings, Inc (NYSE:HTZ). Tourbillon Capital Partners had $39.6 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $27.8 million investment in the stock during the quarter. The other funds with brand new HTZ positions are Alexander Mitchell’s Scopus Asset Management, Benjamin A. Smith’s Laurion Capital Management, and Adam Bernstein, Mark Hoffman and Glenn Vogelman’s Pagoda Asset Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Hertz Global Holdings, Inc (NYSE:HTZ) but similarly valued. We will take a look at Morningstar, Inc. (NASDAQ:MORN), Regal Entertainment Group (NYSE:RGC), Black Stone Minerals LP (NYSE:BSM), and Sensient Technologies Corporation (NYSE:SXT). This group of stocks’ market valuations match HTZ’s market valuation.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $1.55 billion in HTZ’s case. Regal Entertainment Group (NYSE:RGC) is the most popular stock in this table. On the other hand Black Stone Minerals LP (NYSE:BSM) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Hertz Global Holdings, Inc (NYSE:HTZ) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None