Big-Time Investors Like the Rental Car Companies

A previous article on Benzinga detailed why investors should be bullish about the business models of car rental companies such as Avis Budget Group CAR, Ryder Systems R, and Hertz Global Holdings HTZ.

This advice has since been underscored by reports that legendary investor Carl Icahn has amassed a stake of 30 to 40 million shares in Hertz Global. According to that same Benzinga article Dan Loeb of Third Point, a major hedge fund, was also developing a position in Hertz Global. This activity has Hertz Global up nearly 10 percent -- in a week in which the Dow Jones Industrial Average was down slightly.

Hertz Global, meanwhile is up about 16 percent over the past several weeks.

As the previous article about the car rental industry noted, "The business model is peerless and is a good place to start."

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Avis Budget, Ryder Systems and Hertz Global buy motor vehicles at a volume discount. The base rental fees for the first year just about pay for the cost of the car, truck or van, which is then sold. The fees earned from selling insurance, ski racks and others items are additional profits.

And don't forget the outsized charges for bring the car back late or with the tank less than full. What is not to like about that for investors?

With billionaires like Carl Icahn and Dan Loeb piling in, the car rental sector should become even more appealing.

Wall Street chases the hot hand. As a result, Avis Budget and Ryder Systems could invite activist investors. Zip Cars was acquired by Avis Budget less than a year ago..

Even if deals cool off in the sector, the business model of firms that lease motor vehicles is too attractive for long term investors to ignore. That was true when the original Benzinga article was published, and the buying by Icahn and Loeb confirms it.