Sometimes being invested in a stock can feel like being trapped while the enemy takes shots at you from all sides. You were expecting reinforcements to arrive at this exact spot, and while you know you can hang on it sure would be nice to not be fighting this battle alone.

Then, out of nowhere arrives the U.S. Cavalry and although the fight’s not over, you finally believe that victory might be at hand. The stock in question is Hertz (HTZ), which we own, and right now Carl Icahn looks a lot like the U.S. Cavalry.

When an industry has two big publicly traded competitors, comparing their performance is an obvious element of researching their investment potential. HTZ and Avis (CAR), along with privately held Enterprise, dominate the North American car rental market. Consolidation has dramatically improved the prospects for the surviving firms, by reducing competition and thereby allowing price hikes. Rental firms are also making better use of their biggest asset, which is cars. HTZ for example owns Dollar Thrifty and can recycle cars from the Hertz brand whose customers expect a newer car downstream to a lower price point, thereby getting more use out of their cars before selling them. HTZ and Avis are also experimenting with hourly rentals which turn out to be complimentary to their traditional business (business travelers rent for days during the week while hourly renters are typically on weekends). In short, the fundamentals for the business are great.

To examine the periodic public comments from HTZ and Avis you would think they operate in completely different environments. Avis introduced their 2Q results with the following summary, “Our strong second quarter results were driven by our continued growth in both volume and pricing in North America and our relentless focus on accelerating growth in our most profitable channels,” said Ronald L. Nelson, Avis Budget Group Chairman and Chief Executive Officer. “Summer volume and pricing have continued the trends we saw in the first half of the year, and we expect to post record results in our third quarter.”

Meanwhile HTZ, which hasn’t filed a comprehensive financial report this year due to accounting software issues, recently said, “The Company now expects to be well below the low end of its 2014 guidance due to operational challenges in the rental car and equipment segments…”

The operational challenges in the rental market are self-inflicted. The company has been wrong-footed by higher than expected demand combined with recalls on some of their models, with the odd result that, as noted in their recent 8-K filing “Fulfilling advance reservations and contracted business consumed the majority of available fleet. This left the company without inventory to capture more of the higher-rate leisure close-in rentals, which typically generate greater ancillary sales.”

HTZ is a company begging for new leadership. They’re shooting themselves in the foot when their biggest competitor is growing its EBITDA by 19% and expecting a record 3Q. As well as performing poorly, HTZ keeps requesting more time to produce restated financials for 2011-13. It increasingly looks to be just a matter of time before some adult supervision gets involved.

That’s the beauty of investing in public companies. You’re not alone. Carl Icahn has a wonderful quote on his blog from comments he made at a 1988 Texaco annual meeting: “A lot of people died fighting tyranny. The least I can do is vote against it.”

Icahn doesn’t appear to have lost any appetite for a fight during the subsequent 26 years. In the 13D disclosing his 8.7% holding in HTZ, “… lack of confidence in management” was listed as one of the reasons. We share that view. Other notable investors include Glenview (run by Larry Robbins) and Fir Tree (run by Jeffrey Tannenbaum). They’re also fed up with the ongoing mistakes. Tannenbaum recently said that HTZ CEO Mark Frissora, “has completely lost credibility.” We look forward to some fireworks, and to Mark Frissora devoting more time to his golf game.

Important Disclosures

The information provided is for informational purposes only and investors should determine for themselves whether a particular service, security or product is suitable for their investment needs. The information contained herein is not complete, may not be current, is subject to change, and is subject to, and qualified in its entirety by, the more complete disclosures, risk factors and other terms that are contained in the disclosure, prospectus, and offering. Certain information herein has been obtained from third party sources and, although believed to be reliable, has not been independently verified and its accuracy or completeness cannot be guaranteed. No representation is made with respect to the accuracy,  completeness or timeliness of this information. Nothing provided on this site constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments.  Investments in securities entail risk and are not suitable for all investors. This site is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction.

References to indexes and benchmarks are hypothetical illustrations of aggregate returns and do not reflect the performance of any actual investment. Investors cannot invest in an index and do not reflect the deduction of the advisor’s fees or other trading expenses. There can be no assurance that current investments will be profitable. Actual realized returns will depend on, among other factors, the value of assets and market conditions at the time of disposition, any related transaction costs, and the timing of the purchase. Indexes and benchmarks may not directly correlate or only partially relate to portfolios managed by SL Advisors as they have different underlying investments and may use different strategies or have different objectives than portfolios managed by SL Advisors (e.g. The Alerian index is a group MLP securities in the oil and gas industries. Portfolios may not include the same investments that are included in the Alerian Index. The S & P Index does not directly relate to investment strategies managed by SL Advisers.)

This site may contain forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally. Forward-looking statements may be identified by the use of such words as; “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting a portfolio’s operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involves a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of SL Advisors LLC or any of its affiliates or principals nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were made. r

Certain hyperlinks or referenced websites on the Site, if any, are for your convenience and forward you to third parties’ websites, which generally are recognized by their top level domain name. Any descriptions of, references to, or links to other products, publications or services does not constitute an endorsement, authorization, sponsorship by or affiliation with SL Advisors LLC with respect to any linked site or its sponsor, unless expressly stated by SL Advisors LLC. Any such information, products or sites have not necessarily been reviewed by SL Advisors LLC and are provided or maintained by third parties over whom SL Advisors LLC exercise no control. SL Advisors LLC expressly disclaim any responsibility for the content, the accuracy of the information, and/or quality of products or services provided by or advertised on these third-party sites.

All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be suitable or profitable for a client’s investment portfolio.

Past performance of the American Energy Independence Index is not indicative of future returns.