Please ensure Javascript is enabled for purposes of website accessibility

Why Avis Budget Group Stock Popped 13% Today

By Rich Smith – Updated Jun 1, 2020 at 4:29PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A big insider purchase helps lift the shares.

What happened

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%

So what

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.

Car Rental sign pointing up

Image source: Getty Images.

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.

Now what

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?

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Avis Budget Group, Inc. Stock Quote
Avis Budget Group, Inc.
CAR
$167.90 (6.35%) $10.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
331%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.