It’s Time to End the Fantasy About Hertz Stock

Stocks to sell

Sometimes I get asked to write an article and feel like my InvestorPlace colleagues have said everything I can think of saying. That’s the case with Hertz (NYSE:HTZ). The company is in bankruptcy proceedings, yet somehow Hertz stock has become the apple of speculators’ eyes.

Hertz stock sign in Montevrain, France on May 8, 2016.

Source: aureliefrance / Shutterstock.com

Because of this interest in Hertz stock,  rather than go to zero like many stocks of bankrupt companies do, Hertz actually surged from a low of 56 cents to as high as $5 per share.

In some cases, speculators can keep the heart of a weakened, but structurally sound company beating. However, that presumes that the company has a solid plan in place to generate revenue when they exit bankruptcy.

In the case of Hertz, the company really only has one option. Attempt to pivot quickly into an industry that has been transitioning for years. And Hertz is well behind. This means that speculators are only delaying the inevitable.

The Rental Car Industry Has Been Transformed

In Dec. 2019, Lyft (NASDAQ:LYFT) announced its intention to allow users to rent cars. This is just part of the transformation that is blurring the line between renting, ride-hailing, and owning a car. Even auto manufacturers such as General Motors (NYSE:GM) are getting into the crowded space.

And this means that when Hertz does emerge from bankruptcy, it’s going to be and maybe wiser and with less debt on its balance sheet. But it’s going to be competing in an economy where demand for business and leisure travel is non-existent. And the company faces known, and emerging, threats.

But you’ve heard all of that. So let’s try another angle. Let’s look at Hertz stock from the perspective of another type of fantasy, fantasy football.

Listen To The Experts

For the moment, let’s assume there will be a professional football season. Over the course of the next month, millions (yes millions) of people will be drafting players for their fantasy football team.

Many people who play fantasy football make common rookie mistakes. One of the most common is thinking that they know more than the experts (yes, there are fantasy football experts). The problem is, they usually don’t. Yes, they can find diamonds in the rough. But for the most part, following the advice of experts is going to lead to a more enjoyable, and sometimes profitable, season.

If you don’t follow the expert advice, you frequently draft with your heart instead of your head. You try to be the smartest person in the room. And you may steal a win or two on one of your hunches, but it doesn’t breed sustained success.

What does any of this have to do with Hertz stock?

Dana Blankenhorn wrote a column that pointed out Hertz stock has significant volume on the Robinhood trading app. The perils of investing in the Robinhood era was reiterated by Thomas Yeung. Blankenhorn wrote something at the end of the article that caught my attention.

To paraphrase, Robinhood investors will learn from this mistake and, hopefully, become better investors for it. And that would be a good thing for the market.

But that’s only true if they actually learn from their mistakes.

Which brings me back to Hertz stock. Hertz isn’t a troubled company just because it’s in bankruptcy. It was in trouble for a long time before that. The industry was changing and Hertz was slow to react. And when it exits bankruptcy, the market will be changing even more, and Hertz will be behind the curve.

The Bottom Line on Hertz Stock

Hertz stock has been in a downtrend for six years. It’s like watching a star athlete near the end of his career. You may see glimpses of the player they once were, but not enough of them to justify them being on your fantasy football team.

Hertz has an iconic name. And that name may be worth a few dollars to an investor that sticks this out. But I wouldn’t count on it. Professional investors decided a while ago that Hertz had not earned a spot on their investing roster. So why do you believe it should be part of yours?

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for Investor Place since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.

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