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Were Hedge Funds Right About Hertz Global Holdings, Inc. (HTZ)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Hertz Global Holdings, Inc. (NYSE:HTZ) and determine whether hedge funds skillfully traded this stock.

Hertz Global Holdings, Inc. (NYSE:HTZ) has seen a decrease in enthusiasm from smart money recently. HTZ was in 24 hedge funds’ portfolios at the end of March. There were 33 hedge funds in our database with HTZ positions at the end of the previous quarter. Our calculations also showed that HTZ isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are a lot of indicators stock market investors can use to assess their holdings. Two of the most under-the-radar indicators are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can outperform the broader indices by a solid amount (see the details here).

James Dondero Highland Capital Management

James Dondero of Highland Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. With all of this in mind let’s take a peek at the fresh hedge fund action regarding Hertz Global Holdings, Inc. (NYSE:HTZ).

What have hedge funds been doing with Hertz Global Holdings, Inc. (NYSE:HTZ)?

At Q1’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HTZ over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is HTZ A Good Stock To Buy?

Among these funds, Icahn Capital LP held the most valuable stake in Hertz Global Holdings, Inc. (NYSE:HTZ), which was worth $342 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $58.6 million worth of shares. GAMCO Investors, Lyrical Asset Management, and Nantahala Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Icahn Capital LP allocated the biggest weight to Hertz Global Holdings, Inc. (NYSE:HTZ), around 1.9% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, dishing out 0.6 percent of its 13F equity portfolio to HTZ.

Judging by the fact that Hertz Global Holdings, Inc. (NYSE:HTZ) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers that elected to cut their positions entirely in the first quarter. At the top of the heap, Paul Reeder and Edward Shapiro’s PAR Capital Management dropped the largest investment of all the hedgies watched by Insider Monkey, comprising close to $142.4 million in stock, and Clint Carlson’s Carlson Capital was right behind this move, as the fund dropped about $9.9 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 9 funds in the first quarter.

Let’s also examine 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 Suburban Propane Partners LP (NYSE:SPH), Piper Sandler Companies (NYSE:PIPR), Varex Imaging Corporation (NASDAQ:VREX), and Construction Partners, Inc. (NASDAQ:ROAD). This group of stocks’ market caps are similar to HTZ’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SPH 4 40581 -1
PIPR 12 30150 1
VREX 19 67850 0
ROAD 6 21553 -4
Average 10.25 40034 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $515 million in HTZ’s case. Varex Imaging Corporation (NASDAQ:VREX) is the most popular stock in this table. On the other hand Suburban Propane Partners LP (NYSE:SPH) is the least popular one with only 4 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately HTZ wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on HTZ were disappointed as the stock returned -77.2% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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