At this point, buying shares of Hertz (OTCMKTS:HTZGQ) is akin to moving to Cleveland to be closer to the Browns. Hey, I like the Browns in that I don’t like the Pittsburgh Steelers; the enemy of my enemy is my friend and all that jazz. But to actually live in Cleveland? That’s probably the reaction most people have when others are about to buy Hertz stock.
Please don’t think that I’m picking on Cleveland. Yes, anecdotally, I’ve never met someone from the Forest City that wasn’t, well, difficult to work with. And something about Ohio in general tends to make folks more prickly than normal, at least from my experience. It’s just that Cleveland is losing residents by the truckload. And that’s according to Cleveland.com.
In a way, Hertz stock is the Cleveland of the investment world. Occasionally, there is a reason to celebrate the city, such as when they put together a winning season. And it’s that hope that one day, after a few choice draft picks and key personnel moves, the Browns will put it all together, winning a Super Bowl or two in the process.
It could happen, which is eerily similar to what many Hertz stock speculators have chanted as they pull the lever on arguably the star quarterback of the over-the-counter markets. But as many people there are leaving Cleveland, you’ll find an equal number urging you away from HTZGQ stock.
I get it. Hertz stock stinks. If you want a comprehensive reason why you should avoid shares of the embattled rental car firm, check out InvestorPlace markets analyst Thomas Yeung’s breakdown. Long story short, equity holders are at the back of the line in terms of bankruptcy debt payments. When it’s all done and over, shareholders could be getting a whole pot of nothing.
Does a Fundamental Case for Hertz Stock Exist?
I want to be 1,000% clear on something (if I may use a mathematically impossible hyperbole): you should not look at Hertz stock as anything other than a gamble that some crazy folks have decided to engage in. As Yeung stated, there are better — a relative term, I know — options in this space, such as Avis Budget Group (NASDAQ:CAR) or even KAR Auction Services (NYSE:KAR).
But he also stated that you can get rich here with such a high-risk, high-reward venture. And that’s what I’d like to explore. Because honestly, writing another bearish article wouldn’t be interesting as my InvestorPlace colleagues have covered this angle six ways from Sunday.
If you’re willing to understand what you’re getting involved in, you should be aware that indeed, a fundamental case for Hertz stock does exist. It’s not a comfortable one and it can be easily consumed by the competition. But it’s there if you can stomach the very real possibility of losing everything.
In my early December write-up warning against certain travel stocks, I mentioned that the novel coronavirus was a nuanced factor. On one hand, the pandemic hasn’t prevented an all-out deflation in the travel/vacation industry. Pent-up demand has been more than enough in many cases to overcome Covid-19 fears.
However, the pandemic did change Americans’ transportation method preferences. As data from CouponFollow.com indicated, most travelers this holiday season intend to travel by car over any other method.
Initially, that might not sound too strange because we live in an automotive culture. However, the preference for people driving to their destination cuts across CouponFollow’s survey spectrum.
For travel distances less than 300 miles, 68% prefer driving cars. Between 300 to 800 miles, this metric dips to 55%. For distances over 800 miles, it falls further still to 47%. However, this is still more preferable than travel via airplane (42%) or train (10%).
At such distances, I’d much rather put the wear and tear on someone else’s car. I don’t think I’m unique in that regard. And that’s your fundamental argument in favor of Hertz stock.
The Technicals Might Help, Too
If interest in Hertz stock justifies it, I’ll try to explore the technical angle of HTZGQ. In the meantime, if you haven’t read my last research into the topic, check out this analysis. It appears that shares follow a calendar-based rhythm, whereby you have a greater probability of success by buying on Tuesday.
That’s because shares tend to be trading at their weakest on this day (for whatever reason). Further, reverse modeling reveals that — setting aside administrative issues like transaction fees — you can make a hefty profit constantly buying and selling according to the parameters I laid out in the article.
Of course, I don’t recommend this as this was a thought experiment. But it does show that on the right day at the right time, Hertz stock can pleasantly surprise you. So if you truly believe that the Cleveland Browns will win the big one, you might want to throw a buck or two at HTZGQ stock.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.