Can Hertz (NYSE:HTZ) shareholders catch a break? Recently, it seems like the answer is no. But the company has a number of catalysts and with the stock's recent decline, I think it now has a very good chance to double over the next three years -- offering investors today annualized returns of 26%. Yes, it's really that good. So my Special Situations portfolio is adding to its stake in the beleaguered rental company.

Hertz has been hit by a variety of issues as of late. It's in the process of restating its financials. It withdrew its 2014 guidance. It fired its CEO and is looking for a new one. The spin-off of its equipment-rental business will probably be delayed beyond Q1 2015. But each of these is a fixable and short-term issue, and still the stock is down a huge 30% recently.

Despite these issues, the stock has a number of positives that should prove favorable for investors at today's prices. First, the company is spinning off its equipment-rental business. The spin-off actually allows the stand-alone parent to generate more cash.

Second, the parent will put $2.5 billion in debt with the equipment-rental unit. Then that cash raised will effectively be used for deleveraging and stock buybacks at the parent.

And the buybacks should be substantial. The company -- at a much higher stock price -- suggested it could buy back as much as 20% of its shares. I think that could be higher still, with the rather precipitous fall in the stock up until now.

Finally, I think activist investors will provide an important catalyst. I expect the arrival of Carl Icahn and his troika of representatives on the board to help drive positive change at Hertz (pun apologetically intended). Icahn owns nearly 9% of the stock. JANA Partners raised its stake in the company to 7%, up from 1.3% as of June 30.

Each of these catalysts should help propel the stock higher over the next few years.

Foolish bottom line
So later this week, my Special Situations portfolio is buying $1,000 more of Hertz stock. Interested in Hertz or have another stock to share? Check out my discussion board or follow me on Twitter @TMFRoyal.


Jim Royal has no position in any stocks mentioned. The Motley Fool owns shares of Hertz Global Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.