In this market, finding a stock with strong upside that also
happens to have come down well off of its 52-week high isn't as
easy as it may seem.
But thanks to what I call the
performance protection trade
, there are high-fliers that have pulled back. Stocks such as
Tesla Motors (Nasdaq:
fit this description well, as does auto and equipment rental
giant Hertz Global Holdings
HTZ has rewarded shareholders with a 40% gain in 2013, easily
besting the benchmark S&P 500 Index's 24% year-to-date
However, at the time of its 52-week high of $27.75 in
mid-July, HTZ was up more than 70%. Shares sold off through the
rest of the summer before retesting that high in September.
Then, in late September, HTZ suffered a huge one-day sell-off
that drove it below both the 50-day and 200-day moving averages.
HTZ currently trades near $22.80, about 17% off its recent highs
and right about where it traded in mid-April.
The massive sell-off in HTZ came swiftly following the
company's downward revision of guidance for 2013. The company
said it now expects full-year revenue will be between $10.8
billion and $10.9 billion, a $50 million decrease from the
guidance it offered in February. And full-year earnings were
revised downward from a range of $1.78 to $1.88 a share to $1.68
This came on the back of the announcement that CFO Elyse
Douglas was stepping down, citing personal reasons.
Yet despite the downward revision, Hertz actually did very
well on the earnings front last week when it posted
better-than-expected third-quarter results. The company showed an
adjusted profit of $0.73 a share, beating consensus estimates of
$0.71. The company cited strong sales in its U.S.-based Hertz car
rentals, its worldwide equipment rentals and its Dollar Thrifty
brand rental division.
Increased revenue was primarily attributed to Dollar Thrifty.
Hertz said its U.S. car rental segment rose 32.6% year over year
due to its acquisition of the small competitor. In a market
sector that's expected to grow substantially over the next
several years, Hertz is well positioned to keep seeing strong
top- and bottom-line performance.
Action to Take -->
Buying shares here may represent a great value proposition for
traders willing to take a chance on a rebound. If you're looking
for a strong company whose shares have been beaten up a bit in
this bull market, then HTZ is your stock.
-- Buy HTZ at the market price
-- Set stop-loss at $20.93, about 8% below recent prices
-- Set initial price target at $26.16 for a potential 15% gain in
This article originally appeared on ProfitableTrading.com
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