My short position in HTZ took it on the chin today.
music selection: “Hologram” — Katie Herzig
I have shorted 554 shares of HTZ for a total “cost” basis of 8,000.30. The thesis is subprime auto lending is creating a bubble in used car prices. Since car rental companies can largely be thought of as leveraged plays on used car pricing, they are a good way to short the used car segment.
HTZ reported earnings today and it was a big whiff. They missed EPS by a mile and fell short on the top line too. Almost inexplicably, the market sent shares up 23% on the news. There is another news item that seems to be in play. Uber is getting out of the car leasing game and is pushing drivers with poor credit towards car rental companies recommending that lease older model rentals on an hourly basis. The market thinks this could save the car rental companies from being ravaged by weak used auto pricing.
In total, I am down 1,733.48 on the position or 21.67%. I still believe in this short but I will honor a 25% hard stop. I’ll buy to close if shares close above 18.05. They are 17.57 as of this writing.
CAR moved up in sympathy but only about 5%. I have a lot more room to run in that short. Also, I am sticking with my GM and F shorts. Uber’s decision seems to offer little solace to the big automakers. In addition, I have a short position in COF which is partly driven by their aggressive subprime auto lending. Crashing used auto prices wipes out their collateral and puts them at risk.
Devour your prey raptors!