Shares of rental car company Avis Budget Group (CAR 6.35%) popped more than 13% in early trading Monday and didn't look back. At the close today, the stock was up 13.7%
Two possibilities suggest themselves. First, now that Avis's archrival Hertz has filed for Chapter 11 bankruptcy protection, one may presume that competition in the rental car market will decrease. That's bad news for Hertz investors, who could be wiped out in the restructuring. Avis investors, however, may see this as a silver lining around the cloud that's been hovering over the travel industry, and travel-related stocks, these last three months.
And the second explanation for today's gain: One investor in particular is getting more optimistic about Avis. This morning, TheFly.com reported that hedge fund SRS Investment Management has purchased just under 500,000 shares. At a reported $19.78 average price, that works out to about a $9.9 million investment in the company.
Although I'd point out that this represents less than 1% of Avis stock outstanding, it's not an insubstantial sum. It's also coming from an investor that already owns a sizable stake in Avis, and doesn't necessarily need to buy more. According to S&P Global Market Intelligence data, SRS already owned 24% of Avis Budget stock outstanding, and is by far the largest shareholder.
Still, at a trailing P/E of just 6.6, can you blame SRS for thinking this stock is a bargain and wanting to buy more?