Every once in a while, investors will get the chance to reverse engineer some of the latest and biggest decisions being made by some of the biggest investors in the market, those who are empowered with the benefit of insight due to successful track records and the sheer size of capital they manage for their investors.
These authoritative figures often teach retail investors why a business is being bought and sold, and today, there’s a new unlikely signal.
[content-module:CompanyOverview|NASDAQ: HTZ]Value investor Bill Ackman from Pershing Square decided to buy a stock that not a lot of other investors have looked at in the past couple of years, especially as it was subject to drama and speculation during the peak months of the COVID-19 pandemic, even being part of the meme stock mania that took over markets during those years as well.
Today, Ackman has somehow justified a purchase in shares of Hertz Global Holdings Inc. (NASDAQ: HTZ).
Of course, while it may not make much sense on the surface, Ackman’s investment principles are surely present in his thesis and decision to buy up a stake in Hertz.
Even if not all of the principles are met, chances are most of them were, which makes the Hertz investment not that much different from all the other high-quality businesses this investor is known for buying.
The Unexpected Move Welcome by Markets
As of Mid-April 2025, Bill Ackman’s fund reported a sizeable stake in the Hertz company, representing up to 20% ownership in the company and sending the stock higher by more than double this amount (56%) on the day the disclosure had been made public in a press release, a signal that markets like the addition of this investor’s capital and confidence in the future.
Ackman is now the second-largest shareholder in Hertz, which raises eyebrows considering how troubled the company is, even after escaping bankruptcy during the pandemic months of 2020 and 2021. With this in mind, it is up to investors to figure out the reasoning behind the purchase.
Before that investigation gets underway, investors can notice a significant sign of confidence also coming from the broader markets here. Shares of Hertz now trade at a price-to-book (P/B) ratio of up to 17x, which is a significant premium compared to the transportation sector and its average valuation of 1.8x.
Surely, this might be a red flag to some value investors. Still, seasoned ones like Ackman would remind them that the market is always willing to overpay for companies it expects can outperform the peer group and even the broader market as a whole.
Why Hertz Is Expected to Beat
It looks like Ackman wasn’t the only one already considering the future potential of Hertz as an investment, since other institutional buyers were reported for April 2025 as well. Those from Assenagon Asset Management decided to buy up a stake worth up to $12.4 million, another 1% of company ownership.
Such sizeable stakes in the name must have a reasonable thesis and explanation behind them. Now, investors can switch to the financial analysis of what might be driving this recent buying and why the market is willing to pay such a premium for the company’s book value.
Debt Profile: A Potential Driver
One factor behind a potential boost in Hertz valuations is the company’s net debt profile, which is higher than most investors would expect. However, this might actually be a great thing to tolerate in the coming months and quarters.
The reason is that President Trump’s intentions to lower interest rates in the United States economy could significantly help drive earnings and margins higher for Hertz due to its significant debt levels. Interest expenses might be low enough to make this happen.
The Biggest Asset Hertz Has Today
[content-module:TradingView|NASDAQ: HTZ]This might be a bit more speculative, but there’s a reason why Hertz decided to invest up to $2.6 billion into new vehicles even during a slowdown in the business revenue and bookings. Understanding that new trade tariffs and expensive interest rates might make the new car market an impossible mess for most consumers might be the driver.
Holding used vehicles, even if commercial ones, could significantly boost the company’s book value when and if tariffs and more complex financing make the used vehicle market the alternative go-to for consumers, likely to raise valuations of the $12.7 billion worth of vehicles held by Hertz today.
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