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Hertz Global Holdings, Inc. (HTZ) Burns Hedge Funds Once Again

Does Hertz Global Holdings, Inc. (NYSE:HTZ) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Hertz Global Holdings, Inc. (NYSE:HTZ) investors should pay attention to an increase in activity from the world’s largest hedge funds recently. Our calculations also showed that HTZ isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Most Popular Stocks Among Hedge Funds

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the fresh hedge fund action encompassing Hertz Global Holdings, Inc. (NYSE:HTZ).

How are hedge funds trading Hertz Global Holdings, Inc. (NYSE:HTZ)?

At the end of the second quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HTZ over the last 16 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with HTZ Positions

Among these funds, Icahn Capital LP held the most valuable stake in Hertz Global Holdings, Inc. (NYSE:HTZ), which was worth $387.3 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $106 million worth of shares. Moreover, PAR Capital Management, GAMCO Investors, and D E Shaw were also bullish on Hertz Global Holdings, Inc. (NYSE:HTZ), allocating a large percentage of their portfolios to this stock.

As one would reasonably expect, some big names were leading the bulls’ herd. Melvin Capital Management, managed by Gabriel Plotkin, established the most outsized position in Hertz Global Holdings, Inc. (NYSE:HTZ). Melvin Capital Management had $39.1 million invested in the company at the end of the quarter. Mario Gabelli’s GAMCO Investors also initiated a $10.3 million position during the quarter. The following funds were also among the new HTZ investors: Renaissance Technologies, D. E. Shaw’s D E Shaw, and Steve Cohen’s Point72 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. These stocks are Seacoast Banking Corporation of Florida (NASDAQ:SBCF), TPG Specialty Lending Inc (NYSE:TSLX), AAR Corp. (NYSE:AIR), and Phibro Animal Health Corporation (NASDAQ:PAHC). This group of stocks’ market valuations are similar to HTZ’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SBCF 6 42244 -2
TSLX 10 61496 -2
AIR 22 117189 -1
PAHC 16 60038 -2
Average 13.5 70242 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $917 million in HTZ’s case. AAR Corp. (NYSE:AIR) is the most popular stock in this table. On the other hand Seacoast Banking Corporation of Florida (NASDAQ:SBCF) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Hertz Global Holdings, Inc. (NYSE:HTZ) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately HTZ wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HTZ were disappointed as the stock returned -13.3% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.

Disclosure: None. This article was originally published at Insider Monkey.

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