Follow the Money and Buy This Car Rental Giant

Shares of Hertz Global (NYSE: HTZ) are down 40% over the last year on accounting and credibility issues, not to mention some near-term supply-demand imbalances for the car rental market. However, now corporate insiders, big name hedge funds and the company itself are buying the stock hand-over-fist, which makes the stock an interesting 2nd-half and 2016 play.

Facing a possible de-listing for late filings, shares of Hertz snapped back sharply in July after the company filed its Annual Report on Form 10-K for the fiscal year ending December 31, 2014, which includes the restated results for 2012 and 2013 as well as selected unaudited restated financial information for 2011.

One important point from the filing is that sell-side firms can now visit long-only institutions to discuss the investment case in Hertz after a long hiatus (per Morgan Stanley).

Also with the release, Hertz announced progress on its planned separation of its equipment rental business (HERC) and reaffirmed its commitment to its previously announced $1 billion share repurchase program.

Recently it was disclosed that several Hertz insiders bought stock around the current levels:

• President and CEO, John Tague, bought 50,000 shares on 08/13 at $18.06
• EVP/CIO, Tyler Best, bought 27,450 shares on 08/13 at $18.32
• CFO, Thomas Kennedy, bought 25,000 shares on 08/13 at $18.24

In addition, several big name hedge funds are now new to the trade or are adding to bets:

• David Einhorn's Greenlight Capital has a new 5,400,000 shares stake (source 13F)
• Barry Rosenstein's JANA Partners raised its stake from 41,781,473 shares to 41,939,202 shares
• Carl Icahn maintained his 51,922,405 share stake (source 13F)

Analyst Christopher Agnew at MKM Partners rates the shares a Buy with a $29 price target. They see several reasons to be optimist about pricing in the 2nd-half: (1) HTZ plans to reduce capacity in 2H. (2) Jul and Aug are peak volume months; Labor Day provides an extra week of summer demand. (3) Strong Int. inbound trends (stronger pricing) cont. into 3Q. (4) LOR (Length-of-Rental) restrictions are increasing, which signifies tighter industry fleet levels. They also note continued progress on fleet renewal and note the cost savings initiative is on track. Potential catalysts including: equipment rental spin expected in 1H16, sale/exit of non-core/unprofitable businesses, reiterated plans to repurchase $1bn of shares, November investor day and inflection in earnings trends in 2H15.

While 2015 is seen as a "a transition year," given the improving sentiment and hefty insider, institutional and corporate buying, shares of Hertz could revisit the $20s soon on there way to re-test the 2014 all-time high of $30.61.

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