The dream of multi-bagger returns just won’t die, will it? While some loyal (or perhaps stubborn) traders continue to invest in Hertz Global (OTCMKTS:HTZGQ), it is becoming increasingly evident that Hertz stocks may never recover.
I can’t blame anyone for wanting to keep the dream alive. Damn I’m as guilty as anyone – indeed you might have read my mid-december bullish Hertz share article.
Back then, most people had never heard of r / WallStreetBets. The slogan in 2020 was “the salvage trade” and Hertz’s fantasy returning to its former glory seemed alive and well.
This year it’s all about “memes stocks,” which is basically a way of saying wacky stocks that traders might target for a short squeeze. Yet unfortunately for people trying to turn Hertz Stocks into a multi-bagger now, the joke could be on them.
Focus on Hertz Stock
The so-called “bankruptcy trade” actually worked for a while with Hertz stocks, I’ll admit it. In early June, the stock price shot up 82 cents to around $ 5.50.
However, after this pop came an inevitable drop. In late October, Hertz stock fell to 70 cents.
There was a bit of a rally, with Hertz stock closing at $ 1.86 on February 24, 2021. Nonetheless, we need to put this apparent victory into perspective, as stocks have spent much of 2018 and 2019 above it. of $ 10.
Reaching and owning $ 5 would be a reasonable goal for Hertz stock bulls if it weren’t for the business’s negative catalysts. The most obvious of these catalysts, of course, is bankruptcy.
Respect for retail shareholders
Famous Hertz filed for bankruptcy on May 22, 2020. This happened at a time when financial markets were just starting to recover from the novel coronavirus pandemic.
Surprisingly, Hertz announced shortly after that it intended to sell $ 500 million in stock. The company even acknowledged that these shares could prove to be worthless to retail investors.
Fortunately, Hertz has abandoned its plan to sell these new shares, but only after the United States Securities and Exchange Commission began reviewing the company.
It’s hard for me to put down roots for a company that doesn’t look after its retail shareholders. I am also concerned about Hertz’s ability to meet its debts.
Like Investor place Calculated Muslim Farooque contributor, Hertz at some point indebted $ 6 billion and $ 13.5 billion in debt owed to third parties. Farooque also pointed out that the business does not generate any income.
And as I look through Hertz recent press releases page, I can’t find anything that leads me to believe that the company is taking quick and strong action to get back on its feet.
So far in 2021, the only press release is titled: “Hertz is offering a chance to win free home and car cleaning for one year. This is not what I was hoping to see.
No memes today, thanks
There is still hope that the Reddit crowd will suddenly embrace the Hertz action as their meme action. That would definitely increase the share price, right?
Sure, but that’s not a real investment strategy.
No one outside of the inner circle of r / WallStreetBets could have predicted the surprisingly short presses of GameStop (NYSE:GME), AMC Entertainment (NYSE:AMC), Blackberry (NYSE:BB) and other actions.
Also, as we now know in hindsight, some of those memes stocks collapsed as quickly as they grew.
Hertz stock had already had its irrational pop-and-drop last year. A sequel is certainly possible, but it’s not something reliable or easy to time successfully.
The point is, meme stock trading is not an easy thing to do. Perhaps the best policy is to stick with companies that are not under the same financial pressure.
The result on Hertz Stock
Maybe it was fun watching Hertz fly and fall if you weren’t invested. If you had financial skin in the game, however, the joke probably wasn’t very funny.
Rather than trying to time the market and make Hertz stocks profitable, I would advise caution and a greater focus on companies that don’t face tax issues.
Equally important, I recommend sticking to companies that have more respect for retail shareholders.
At the time of publication, David Moadel had (directly or indirectly) no position in any of the stocks mentioned in this article.
David Moadel provided compelling content – and sometimes crossed the line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga and (of course) InvestorPlace.com. He is also a chief analyst and market researcher for Portfolio Wealth Global and hosts the popular YouTube financial channel Looking at the Markets.