Stocks that are down precipitously are generally down for a reason, and right now most companies are getting hammered because of high debt levels. With leverage nearly double the industry average, Hertz Global Holdings Inc (HTZ) has paid a price, despite its solid fleet management and cost containment strategy.
One note of encouragement is the purchase of the company’s shares by Carl Icahn, who is over a 10% owner in the company. From March 10 to March 12, he purchased nearly 12M shares, increasing his holdings of HTZ by 25%.
As of February 28, 2020, the short interest for HTZ was over 28% and a short ratio of 5.07. A short is where the stock is sold before the shares are purchased. The shares are provided by the broker to be sold for a certain rate of interest. A short interest is extreme and presents an opportunity for the shorts to cover quickly and the price to rise a lot. The short ratio refers to the number of days it would take to cover the 18.26M that are short and is based on the average volume of the stock. In other words, based on the average volume, it will take approximately 5 days to buy back the shares. That threshold is significant and reflects the substantial movement in the stock on Friday.
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Action to Take: HTZ is a long opportunity with a close above $6 and a near-term target of $10.