Hertz Global Holdings, Inc. operates as an airport general use vehicle rental company. Hertz Global Holdings’s insiders have invested
more than 1.58 million shares
within the past three months.
A well-known argument is that insiders investing more in their own companies’ shares sends an optimistic signal.
A two-decade research published in The MIT Press (1998) showed that stocks following insider buying outperformed the market by 4.5%.
However, these signals may not be enough to gain conviction on whether to invest.
I will be analysing whether these buying activities are supported by favourable future outlook and recent share price volatility.
Which Insiders Are Buying?
There were more Hertz Global Holdings insiders that have bought shares than those that have sold.
In total, individual insiders own
less than one million shares in the business, or around 0.77% of total shares outstanding.
Insiders that have recently bought more shares are:
|Name||Management||Board||Total Annual Compensation|
The entity that bought on the open market in the last three months was
Gabelli Foundation Inc Endowment Arm GAMCO Investors Inc..
Although this is an institutional investor, rather than a company executive or board member, the insights gained from direct access to management as a large investor would make it more well-informed than the average retail investor. In this specific instance, I would classify this investor as a company insider.
Is Future Growth Outlook As Bullish?
At first sight,
Hertz Global Holdings’s future looks
Delving deeper into the line items,
Hertz Global Holdings is believed to experience
a restrained level of top-line growth over the next year,
and along with high cost growth, is expected to contribute to a highly negative expected earnings growth.
This illustrates that cost growth has excessively exceeded that of the top-line, leading to an unsustainable decline in earnings.
Although insiders may see prosperous times ahead given the current investment period, leading to their conviction to buy. Or else they may simply deem the stock to be undervalued by the negative sentiment.
Can Share Price Volatility Explain The Buy?
Another factor we should consider is whether the timing of these insider transactions coincide with any significant share price movements.
This means, if insiders believe shares were heavily undervalued recently, this would provide a prime opportunity to buy more irrespective of its growth outlook.
Hertz Global Holdings’s shares ranged between $22.53 and $14.46 over the past three months.
a fairly large volatility with a share price movement
This movement could potentially be significant enough to warrant insiders to accrue their shares.
Hertz Global Holdings’s insider meaningful buying activity tells us the shares are currently in favour,
however, earnings expectations tell a different story,
whilst a moderate share price movement could provide incentive to buy now.
However, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision.
I’ve put together
- Financial Health: Does Hertz Global Holdings have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Hertz Global Holdings? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
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