Hertz (symbol HTZ), the American car rental company, is universally known. A household name. Founded in 1918, one hundred years later, the company had 10,020 corporate franchisees, 38,000 employees and annual revenues of US$9.5 billion.
Last Friday, May 22, Hertz filed for U.S. bankruptcy protection! In half an hour, the stock dropped by nearly 10%!
Preparing for the bankruptcy, C-suite executives, that is, the chief executive officer (CEO), chief financial officer (CFO), chief operating officer (COO), and chief information officer (CIO) knew perfectly well where the stock was headed. This is inside information which they are not to take advantage of. They might well be absolutely clean.
About two weeks before announcing the bankruptcy, the number of Hertz shares which were sold short, added up to 25.66% of all shares outstanding. By comparison, the number of Americo’s U-Haul (symbol UHAL) shares which were sold short, added up to 5.11% of all shares outstanding. (Americo rents trailers and trucks used for “do-it-yourself” moving.)
Do C-suite executives have spouses, children, friends and relatives without being personally involved in short selling?
Dear reader, figure it out for yourself.
What does this have to do with the Monday Morning Millionaire Program and the The Six Habits of Monday Morning Millionaires? Simply stated, the third habit for investors is to buy the U.S. economy as a whole, that is, they need to get away from picking individual stocks.
It is true that by not picking stocks, Monday Morning Program members will never benefit from the phenomenal growth of securities like the FAANG stocks. (Facebook, Amazon, Apple, Netflix and Google) But for every one of the FAANG stocks, there are dozens and dozens of companies which we have never heard of and which lost money for their shareholders.
Over the long run, investors with The Six Habits of Monday Morning Millionaires don’t need to rely on luck. But luck never hurts.