By Mackenzie Tatananni

Hertz Global Holdings is "uniquely well-positioned in the current tariff environment" and set to deliver an attractive return on investment, said hedge fund manager Bill Ackman.

The outspoken CEO of Pershing Square Capital Management, Ackman shared in a social media post that his company had built a 19.8% stake in Hertz since it began accumulating shares late last year.

Hertz stock popped on Wednesday after Pershing Square disclosed a stake of 12.7 million shares, leaving investors to wonder what the fund sees in the struggling business.

The rental-car company posted a loss of nearly $2.9 billion in 2024. Hertz chalked up the disappointing results to vehicle depreciation and the falling price of electric vehicles, which it began buying in 2021 in an attempt to distinguish itself from competitors.

So what's underpinning Pershing Square's big bet on Hertz? For starters, Ackman believes the company stands to benefit from auto tariffs that likely will trigger used car prices to rise in the near term.

Automakers such as Audi and Volkswagen already have pledged to halt imports to avoid paying the 25% levies. As used cars become more readily available, the resulting demand could cause prices to climb.

Hertz owns a fleet of more than 500,000 vehicles valued at roughly $12 billion, Ackman noted. A 10% hike in used car prices would equate to a $1.2 billion gain on its auto assets.

Other parts of its appeal are more fundamental and serve to benefit the company over time. Ackman highlighted an "operational turnaround plan" under the oversight of Hertz CEO Gil West, who stepped to the helm last year.

Management's efforts to rotate Hertz's fleet, trim operating costs, and increase unit revenue "will significantly improve profit margins over the next several years," Ackman asserted.

The billionaire investor sees other opportunities that are of a more aspirational nature. "Now for a fun thought experiment: What if UBER partnered with Hertz on an AV fleet roll out over time?" Ackman wrote.

In his view, Hertz's 500,000-vehicle-strong installed fleet and the "significant scope and scale of its thousands of locations" make it an ideal partner for the ride-hailing company.

Hertz shares closed up 44% on Thursday, even as markets traded mixed. The stock has gained nearly 126% over the past two days.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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April 18, 2025 08:55 ET (12:55 GMT)

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