An old friend of mine tipped me the shares of silver miner Hochschild Mining (HOC) at around 70p in late 2008 as the GFC panic was at its peak. When I asked him about the prospects for silver he appeared to be only vaguely aware that this was its game...
He instead pointed out that the company had been founded in 1911 and that any enterprise that had survived two great wars and the great depression was unlikely to go out of business anytime soon, as the share price was suggesting. Naturally, I ignored the old buffer and missed a monster rally to 700p. Hochschild shares briefly traded below 100p during this year’s March sell off and have since doubled. If history is any guide they should trade much higher, regardless of the silver price, and I am long at these levels.
I think it makes sense to treat companies with 100 year plus histories with respect and to think extremely hard before shorting them. My only real foray in this regard was being short Thomas Cook because bankruptcy seemed inevitable. Now we have Hertz (NYSE - HTZ), the 102-year-old car rental company where bankruptcy was announced on 22nd May. I won’t go into the intricacies of chapter 11 filings in the US but I think it is fair to say that there is no way that Hertz’s $18.8 billion of debt will be made whole. This means that shareholders are extremely unlikely to receive anything in the restructuring.
A 39% shareholder, Carl Icahn, seems to have grasped this when he dumped his entire stake for 75 cents a share at the first opportunity after the news. That there was a market bid at this level seems in large part due to a surge in Robin Hood accounts holding Hertz post the bankruptcy filing. These are the small retail army of speculators, who, having been stuck at home with no sport to bet on and recently armed with a cheque from the government, have taken to gambling on stocks like ducks to water and are increasingly seen as the prime driver behind the current market rally. At $1.02 per share, a cent for every year of its existence to date, Hertz is a compelling shorting opportunity which should be seized before the borrow is pulled.
This article first appeared on the N50 website which Tom Winnifrith runs with Steve Moore & Lucian. To access the website ahead of the next share tip from Tom & Steve and a new shorting piece this week click HERE
Filed under: Hochschild Mining, Hertz, Powerhouse Energy, commercial property, IWG, Catenae
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