We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Hertz Global Holdings, Inc. (NYSE:HTZ) in this article.
Is Hertz Global Holdings, Inc. (NYSE:HTZ) a buy here? The smart money is in an optimistic mood. The number of bullish hedge fund bets advanced by 7 lately. Our calculations also showed that HTZ isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). HTZ was in 33 hedge funds' portfolios at the end of December. There were 26 hedge funds in our database with HTZ positions at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_215987" align="aligncenter" width="399"] Carl Icahn of Icahn Capital LP[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. With all of this in mind let's go over the recent hedge fund action encompassing Hertz Global Holdings, Inc. (NYSE:HTZ).
What does smart money think about Hertz Global Holdings, Inc. (NYSE:HTZ)?
Heading into the first quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HTZ over the last 18 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Icahn Capital LP held the most valuable stake in Hertz Global Holdings, Inc. (NYSE:HTZ), which was worth $691.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $152.1 million worth of shares. PAR Capital Management, GAMCO Investors, and D E Shaw 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 Elm Ridge Capital allocated the biggest weight to Hertz Global Holdings, Inc. (NYSE:HTZ), around 4.26% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, dishing out 2.77 percent of its 13F equity portfolio to HTZ.
As one would reasonably expect, some big names were breaking ground themselves. Carlson Capital, managed by Clint Carlson, assembled the largest position in Hertz Global Holdings, Inc. (NYSE:HTZ). Carlson Capital had $9.9 million invested in the company at the end of the quarter. Lee Ainslie's Maverick Capital also made a $4.3 million investment in the stock during the quarter. The following funds were also among the new HTZ investors: Dmitry Balyasny's Balyasny Asset Management, James Dondero's Highland Capital Management, and Brandon Haley's Holocene Advisors.
Let's now review 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 Shake Shack Inc (NYSE:SHAK), PennyMac Mortgage Investment Trust (NYSE:PMT), Verra Mobility Corporation (NASDAQ:VRRM), and Turning Point Therapeutics, Inc. (NASDAQ:TPTX). All of these stocks' market caps are closest to HTZ's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SHAK,25,343253,-4 PMT,19,126885,4 VRRM,33,300381,17 TPTX,23,560633,3 Average,25,332788,5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $333 million. That figure was $1388 million in HTZ's case. Verra Mobility Corporation (NASDAQ:VRRM) is the most popular stock in this table. On the other hand PennyMac Mortgage Investment Trust (NYSE:PMT) is the least popular one with only 19 bullish hedge fund positions. Hertz Global Holdings, Inc. (NYSE:HTZ) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately HTZ wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HTZ were disappointed as the stock returned -67.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.