value Posted August 6, 2009 Share Posted August 6, 2009 Hi Bruce Berkowitz of Fairholme mentioned in last OID about his investments in car rental biz - Avis. Can anyone following Avis (CAR) tell hows did the company did in past few months - the stock move up from as low as 0.5 to 10! Value -India Link to comment Share on other sites More sharing options...
jjlin Posted August 6, 2009 Share Posted August 6, 2009 Hi Bruce Berkowitz of Fairholme mentioned in last OID about his investments in car rental biz - Avis. Can anyone following Avis (CAR) tell hows did the company did in past few months - the stock move up from as low as 0.5 to 10! Value -India Berkowitz was talking about Hertz, not Avis. Link to comment Share on other sites More sharing options...
valuecfa Posted August 6, 2009 Share Posted August 6, 2009 That's right, it was Hertz. The other company he spoke highly of as his other favorite investment idea in that OID issue was United Rentals. I believe United Rentals is still an outstanding bargain. ~Long: URI Link to comment Share on other sites More sharing options...
value Posted August 6, 2009 Author Share Posted August 6, 2009 Pardon my mistake But any idea wht happened to warrant such a big turnaround? Thanks Link to comment Share on other sites More sharing options...
valuecfa Posted August 6, 2009 Share Posted August 6, 2009 People started renting cars again. The company's low share price and bond yields reflected a fear of insolvency, given large debt maturities. The plan was for the company to shrink its fleet to increase free cash flow, to put a dent in near term debt maturities. and to increase utilization rates. Alas, people started renting cars again, as the economy has not gone to hell, and the company has been buying cars at discounts like crazy to meet this unexpected upturn in rental demand. Basically, a much quicker than expected upturn in demand. Link to comment Share on other sites More sharing options...
jjlin Posted August 7, 2009 Share Posted August 7, 2009 People started renting cars again. The company's low share price and bond yields reflected a fear of insolvency, given large debt maturities. The plan was for the company to shrink its fleet to increase free cash flow, to put a dent in near term debt maturities. and to increase utilization rates. Alas, people started renting cars again, as the economy has not gone to hell, and the company has been buying cars at discounts like crazy to meet this unexpected upturn in rental demand. Basically, a much quicker than expected upturn in demand. Here's the quote from the latest Fairholme letter: For sure, it will take a long time to repair the damaged balance sheets of individuals, corporations and entire nations. Still, we are hopeful that the global economy is on the mend. One of our canaries in the economic coal mine is Hertz Global Holdings. In a June 25 interview on CNBC, Hertz CEO Mark Frissora said “we’ve seen continuous improvement every single week for the last 10 weeks in the US rent-a-car space on improving demand for the summer season. We’ve been buying a lot of cars the last eight weeks…. We’re scrambling to buy as many cars as we can.” Others are beginning to chirp, but are less sanguine. You can find the whole letter here: http://www.fairholmefunds.com/2009semi.pdf Link to comment Share on other sites More sharing options...
Packer16 Posted August 7, 2009 Share Posted August 7, 2009 The reason the company went up so much is the leverage in these types of business. Berkowitz's other holding in the rent space is URI. He has an interesting thesis of large free cash flows being generated from de-fleeting (reduction in fleet size to match demand) and being used to reduce debt. I think most of his investment is in the debt of these firms as they were yielding high returns. The common stock of these firms is like a call option on the value of the equipment they lease out. If you go to the Fairholme site, you can get an OID excerpt which describes his thesis in detail. Packer Link to comment Share on other sites More sharing options...
value Posted August 7, 2009 Author Share Posted August 7, 2009 Thank you guys, you are a wonderful source of learning. Link to comment Share on other sites More sharing options...
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