Are you the type of investor who likes to buy and hold despised stocks? If so, then Hertz Global (OTCMKTS:HTZGQ) should be right up your alley. Even since the car rental firm filed for bankruptcy protection, Hertz stock has been an object of verbal venom and ridicule.
It really wasn’t very long ago that Hertz was an iconic and hugely successful company. For a long time, the company’s only major competitor was Avis Budget Group (NASDAQ:CAR) and Hertz generally had stronger brand-name recognition.
Then came the novel coronavirus, and everything changed. The same pandemic that impacted cruise lines and airlines also devastated car rental companies, and particularly Hertz.
Today, the Hertz haters are out in full force on financial message boards. You’ll have to do some digging to find a positive article on Hertz stock. And so, this one’s dedicated to the true contrarian souls out there. If you have the stomach for it, a position in Hertz might just pay off in the long run.
A Closer Look at Hertz Stock
When times were better, Hertz stock traded under the ticker symbol HTZ on the New York Stock Exchange. Don’t go looking for the stock under that ticker now, as it’s not there anymore.
Hertz stock was delisted from the New York Stock Exchange on Oct. 30. but now can be purchased and sold on the over-the-counter market under the ticker symbol HTZGQ.
So, how has the stock fared since its inauspicious OTC debut? Actually, the shareholders have seen some gains if their timing was good. From early November to Dec. 7, Hertz stock ascended from less than $1 to the $2.50 area.
That was followed by a retracement, and Hertz stock settled at around $1.84 on Dec. 11. So, as you can see, Hertz shares are prone to large moves percentage-wise. That’s why it’s only appropriate for small position sizes, even if you’re the boldest contrarian on the block.
The words “Chapter 11,” which represent a filing for bankruptcy protection, are enough to scare many people away from an investment opportunity.
I won’t blame anyone for avoiding Hertz stock in light of the company’s Chapter 11 filing. There’s always the possibility that the company may ultimately fail and the stock could go to zero.
On the other hand, commentators have been predicting Hertz’s demise for quite a while now. Yet, with 2021 just around the corner, the company’s still here and we’re still talking about it.
And according to Hertz President and CEO Paul Stone, his company’s Chapter 11 process is actually “progressing well.”
To defend this position, Stone asserts that “new funding and commitments of more than $6.0 billion allow us to continue taking steps to best position our business as a rental-car and fleet-leasing leader through the pandemic and for the future.”
Even the staunchest critics must admit that $6 billion in capitalization will help Hertz navigate its way through this crisis.
Along with the capital inflow, Hertz is aggressively pursuing a course of cost reduction. That’s a key component of Hertz’s turnaround strategy, and in the long run it could save the company from financial ruin.
Encouragingly, Hertz reported in November that it had increased its annualized global cost savings target from the already ambitious $2.5 billion to $3 billion.
Then, Hertz took a further step in that direction when the company agreed to sell “substantially all of the assets of” its subsidiary, fleet management firm Donlen Corporation, to Athene Holding (NYSE:ATH).
Subject to adjustments for fleet equity, working capital and assumed debt, Hertz anticipates an anticipated cash payment of $825 million for this sale.
Stone called the Donlen sale “another significant accomplishment for Hertz during our financial restructuring,” and I tend to concur with the CEO’s assessment. It’s a smart move for Hertz to slim down now in order to firm up its fiscal positioning and (hopefully) stage an eventual comeback.
The Bottom Line
Don’t get me wrong. There’s absolutely no assurance that Hertz will succeed in its turnaround efforts. So, Hertz stock will remain speculative for the foreseeable future.
That being said, it’s heartening to see Hertz taking proactive steps towards a successful financial restructuring. Maybe, in the final analysis, the words “Chapter 11” aren’t so scary after all.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.