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Hertz Global Holdings emerged from bankruptcy in June and is in great shape for 2022.
David Paul Morris/Bloomberg
This article is an excerpt from Barron’s 10 favorite stocks for 2022, published on Dec. 17. To see the full list, click here.
Rental cars are the best business in travel now, as auto shortages have led to strong pricing and high used-car prices.
Hertz Global Holdings
(ticker: HTZ) and rivals
Avis Budget Group
(CAR) and privately held Enterprise—which control a combined 95% of the U.S. market—are cleaning up after years of mediocre returns.
Jeffries analyst Hamzah Mazari has said, “What once was a dysfunctional oligopoly with no pricing power is a functional oligopoly with pricing power.” Anyone who has rented a car since the spring can probably attest to that.
Hertz, which emerged from bankruptcy in June, is in great shape for 2022. It will have a clean balance sheet with minimal net debt (excluding asset-backed securities) after the payoff of high-rate preferred stock, and is taking profitable initiatives like the purchase of 100,000
Teslas
by the end of 2022 and a deal to sell used cars through
Carvana
(CVNA).
Hertz shares, at about $21, are inexpensive, trading for less than nine times projected 2022 earnings. J.P. Morgan analyst Brinkman has an Overweight rating and a $30 price target, citing “strong industry tailwinds and a multitude of company-specific drivers.”
| Company / Ticker | Recent Price | YTD Change | 2021E EPS | 2022E EPS | 2022E P/E | Dividend Yield | Market Value (bil) |
|---|---|---|---|---|---|---|---|
| Amazon.com / AMZN | $3,377.42 | 4% | $41.11 | $51.37 | 65.7 | None | $1,713 |
| AT&T / T | 23.71 | -18 | 3.38 | 3.17 | 7.5 | 8.8% | 169 |
| Berkshire Hathaway / BRK.A | 454,550.00 | 31 | 17,466.30 | 18,928.50 | 24.0 | None | 673 |
| General Motors / GM | 58.39 | 40 | 6.73 | 6.93 | 8.4 | None | 85 |
| Hertz Global Holdings / HTZ | 21.01 | -22* | 4.02 | 2.55 | 8.2 | None | 10 |
| IBM / IBM | 125.93 | 5 | 10.05 | 11.04 | 11.4 | 5.2 | 113 |
| Johnson & Johnson / JNJ | 173.01 | 10 | 9.83 | 10.38 | 16.7 | 2.5 | 455 |
| Nordstrom / JWN** | 20.05 | -36 | 1.27 | 1.99 | 10.1 | None | 3 |
| Royal Dutch Shell / RDS.B | 42.82 | 27 | 4.86 | 6.19 | 6.9 | 3.9 | 166 |
| Visa / V*** | 214.37 | -2 | 5.91A | 7.04 | 30.5 | 0.7 | 467 |
*Since July 1. **Estimates for Jan. 2022 and Jan. 2023 fiscal year ends. ***Sept. fiscal year end. E=estimate. A=actual.
Source: FactSet
Write to Andrew Bary at [email protected]