Hertz Got Crushed – and I’m Buying More

It's already been a couple months since my Special Situations portfolio bought its second slug of Hertz (NYSE: HTZ  ) stock, and I'm back to add to my position following news that the company wouldn't make the low end of its 2014 guidance.

Yes, the company announced that it was withdrawing its 2014 guidance and second quarter numbers were lackluster. Plus, the spinoff of its equipment-rental business might be delayed beyond Q1 2015. The market's reaction is the typical short-termism that gives an opportunity to investors who can look beyond next quarter. So my Special Situations portfolio is buying more.

Why buy now?
Mr. Market gets into a tizzy when things don't go exactly his way, and that's what we're seeing with Hertz right now. Nevertheless, the company has substantial tailwinds in its favor over the next few years, and today's sell-off is a great buying opportunity.

Deutsche Bank's analysts came out with a sentiment representative of Mr. Market's current disdain: "Net-net, it's difficult to find any positives in the report. Collectively, we view the data points as a major fracture point in the Hertz bull case, particularly on the operations side....Many issues appear to be Hertz-specific; that's what troubles us...At a minimum, conviction has been severely reduced. As such, we are downgrading Hertz to Hold."

Ok, few positives for the near term...but what about for next year? What about all the value that's going to be created by the spinoff? What about previously announced buybacks for 20% of the stock? What about an increased leverage target, meaning even more buybacks? What about strong industry fundamentals and consolidation that should bolster margins in this triopoly industry? These are not one quarter issues, but rather longer-term value generators. For more on Hertz, follow me on Twitter: @TMFRoyal. And check out my dedicated discussion board.

So by no means is Hertz's announcement a "major fracture point in the Hertz bull case" unless you're looking at what happens to the stock in the very near term. People still rent cars and will continue to do so, and we still have those bevy of catalysts. So, Fools, look beyond today's pessimism to the nice returns lining up for buyers of Hertz at today's prices.

Foolish bottom line
So on the next market day, my Special Situations portfolio is buying $500 more of Hertz stock. Interested in Hertz or have another stock to share? Check out my discussion board or follow me on Twitter @TMFRoyal.

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