The Morning Brief: Hedge Fund Favorite Hertz Veers Off the Road

The rental car company’s shares fell on a report that used car pricing is weakening.

Shares of hedge fund favorite Hertz Global Holdings fell 4.4 percent after plunging 9 percent on Tuesday. Investors were spooked after Ally Financial, which finances car purchases, warned that pricing in the used car market is weakening. This is bad for companies like Hertz, which not only make money from renting their cars but also from then selling their used cars when they regularly upgrade their fleet. At year-end, activist investor Carl Icahn was the largest shareholder in the company, with more than 6.9 percent of the shares. Other top-12 holders included hedge fund firms Glenview Capital Management, SRS Investment Management, Coatue Management and Two Sigma Investments. The stock is now down about 14 percent year-to-date.


Credit Suisse lowered its rating on retail and consumer durables and apparel stocks to market weight from overweight. In a report to clients from market strategists (not the bank’s industry analysts), Credit Suisse says some of the concern about a potential new border tax is cooked into the stock prices, but “not fully.” Credit Suisse points out that long-short hedge funds have a decade-high net exposure to large-cap retailers, suggesting “some risks of crowding” and unwinding in the position. “Net exposure may be ripe for reversion, and we’d note that this metric has been strongly correlated with relative performance of the group in recent years,” it adds in the report. Crowding concerns are most pronounced for internet and direct marketing retail and auto components. It does not address its views on the individual stocks in these sectors, however.


Viking Global Investors raised its stake in Gulfport Energy by about 50 percent, to more than 9.13 million shares, according to a regulatory filing. As a result, the Tiger Cub owned 5.8 percent of the energy exploration and production company as of March 10.


Adage Capital Partners disclosed it owns nearly 620,000 shares of Gemphire Therapeutics, or 5.85 percent of the biotech company, which went public last summer.