With a tiny short interest of .10% (and what are those people thinking?) aside from the obvious fuss over succession as Buffett and right hand man Charlie Munger are both in their 80s, what are the risks to Berkshire?
Any risk would be macroeconomic in nature. With housing surging, the railroads doing great, and a slowly improving economy there would be little downside barring a general market downturn.
Still number one?
Lastly, there’s Hertz Global Holdings, Inc. (NYSE:HTZ), the auto and equipment rental leader, which is close to its 52 week high of $25.02, more than a double its low of $10.22. Its EPS and sales growth have been stellar, warranting the double. Q1 revenue improved by 24% over the year ago period.
Oscar Schafer of Rivulet Capital argued at the Skybridge Capital Conference last week the stock should be at $45 with only three major auto rental companies compared to ten a decade ago. He likens the consolidation of auto rental companies to that of airlines’ and pharmaceuticals’ increasing demand and reducing competition. Wall Street is bullish with a forward P/E of 9.98 despite a 12.2% short interest. Tilson noted, “There can be a decade-long tailwind of strong top-line growth combined with improved pricing, margins and return on capital, leading to rapidly rising earnings.”
Hertz Global Holdings, Inc. (NYSE:HTZ) is expecting FTC approval for its purchase of Dollar Thrifty soon. Rival Avis bought Zipcar in March. Avis’ trailing P/E is only 13.93 compared to Hertz Global Holdings, Inc. (NYSE:HTZ)’s 36.22. Expect brisk competition as the two vie for number one status (Hertz is now number two).
Both companies should benefit from long term trends toward lower car ownership rates among millennials and increased airline travel. Tilson concluded auto rental companies are like the railroads a century ago and have not yet hit their zenith.
A Foolish takeaway
If you are interested in growth momentum, then Netflix, Inc. (NASDAQ:NFLX) is your stock. If you want all-in-one diversification under the expert hand of an investing rockstar, there is no better company than Berkshire Hathaway Inc. (NYSE:BRK.B). Hertz Global Holdings, Inc. (NYSE:HTZ) may be a name that Tilson likes, but I’m not so sure that Avis with Zipcar may not be a better buy with a lower P/E.
The article Three Terrific Tips from Titan Tilson originally appeared on Fool.com and is written by AnnaLisa Kraft.
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