Hertz Stock rallies. Here is a better way to play.

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Hertz shares have risen nearly 40% this week.

Cindy Ord / Getty Images


Hertz Global Holdings

action this week rallied around optimism about the health of the rental car market and the appointment of the former head of


Ford engine

as interim CEO of Hertz.

Hertz shares (ticker: HTZZ) were up $ 4.35, or 19.6%, to $ 26.50 on Wednesday and are up 37% this week. The company’s warrants (HTZZW) advanced $ 1.38, or 14.1%, to $ 11.18. 30-year warrants seem like a better bet now than stocks for those who are bullish on Hertz, as they trade below their intrinsic value of $ 12.70 each. The exercise price is $ 13.80 per share. (Intrinsic value is calculated by subtracting the strike price from the stock price.)

Hertz was backed by the strength of his rival’s actions


Budget Opinion Group

(AUTO). Avis shares have risen 30% in recent weeks, although they fell 20 cents to $ 128.58 on Wednesday.

The continuing shortage of vehicles, new and used, is driving used car prices, benefiting Hertz and Avis when they offload cars from their fleets, and support rental car pricing.

The expectation that new car shortages will persist until 2022 is optimistic for car rental companies, as it increases the chances that high used car prices and robust prices continue into the next year.

Hertz appointed Mark Fields as interim CEO on Tuesday, which sparked speculation that the company roadshow and so-called “re-IPO” after exiting bankruptcy on June 30 could take place in a months or so. Hertz has announced plans to do both by the end of the year. Investors seem to like the fact that Hertz was able to arrange for someone of Fields’ stature to become CEO, if only for a limited period.

Hertz has said little publicly in recent months other than posting strong second quarter results, highlighted by a quarterly record of $ 639 million in earnings before interest, taxes, depreciation and amortization.

The company ended the period with a healthy balance sheet with net cash of $ 300 million excluding debt backed by its fleet of vehicles. Liquidity likely increased in the third quarter due to high rental car prices amid a shortage of vehicles.

There is hardly any analyst coverage on Hertz, mainly because its stocks are lightly traded on the pink sheets. Hertz will likely be more covered when its shares move to the Nasdaq or NYSE by the end of the year.

In a statement, Fields said, “The world is going to be hearing a lot about Hertz in the weeks and months to come.”

Hertz’s story could be a good one, including strong earning power and potential return on capital to shareholders. The company has spoken of greater exposure to electric vehicles in the coming years.

Hertz is now valued at $ 12 billion, compared to Avis’ $ 8.6 billion. Avis also has approximately $ 3 billion in corporate net debt, excluding debt backed by its fleet of vehicles. Hertz owns $ 1.5 billion in preferred shares that have been issued to funds managed by


Global management of Apollo

(APO).

Write to [email protected]

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