With crude futures still in the red and the S&P 500 barely in the green this morning, shares of Hertz Global Holdings Inc (NYSE:HTZ), Blount International Inc (NYSE:BLT), Cyberark Software Ltd (NASDAQ:CYBR), and Global Partners LP (NYSE:GLP) are rallying. Let’s find out why investors are buying into these equities today as well as what relevant hedge fund sentiment has to say about the direction of these stocks.
Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by 53 percentage points since the end of August 2012. These stocks returned a cumulative of 102% vs. a 48.6% gain for the S&P 500 Index (see the details here). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).
First on our list of stocks in the green today is car rental giant Hertz Global Holdings Inc (NYSE:HTZ), whose shares are up by 1.1% in morning trading as the stock remains buoyant following the revelation that Carl Icahn‘s Icahn Capital LP recently upped its stake in Hertz by 11.79 million shares to 63.7 million shares, or 14.34% of the float. Icahn and other smart money investors are bullish on vehicle rental companies such as Hertz because the sector has consolidated substantially in recent years, leaving just three businesses with more than 90% of the market share in the U.S. The consolidation should allow for more favorable pricing, higher margins, and more top-line growth (although the vehicle rental companies haven’t shown those traits yet because of the strong dollar and weak global macro-economic conditions). Although Hertz missed both third quarter earnings and revenue estimates, its shares trade for just 12-times forward earnings estimates.
Aside from Icahn Capital, our data shows 53 other elite funds that we track were long Hertz Global Holdings Inc (NYSE:HTZ), including Barry Rosenstein’s JANA Partners, which had a stake of 39.19 million shares at the end of September.
Next on our list of morning gainers is Blount International Inc (NYSE:BLT). Shares of the machine tool maker have surged by 82.34% after the company agreed to be acquired by Claus Moller‘s P2 Capital Partners, and American Securities LLC in an all-cash transaction for $855 million, including the assumption of Blount International Inc (NYSE:BLT)’s debt. Under the terms of the deal, Blount shareholders will receive $10 in cash for each share of Blount that they own. The deal is expected to close in the first half of 2016, pending its approval by Blount shareholders and industry regulators. 20 elite funds in our database were long 42.4% of Blount’s float at the end of the third quarter.
On the next page, we examine why Cyberark and Global Partners are making noteworthy market moves today.