Avis Budget Group: Today’s Best Nearby Cap-Gain Transport Rental Stock Prospect

Summary:

• A 3-5 month prospect from here of CAR share prices could reasonably range from a $172.43 low to a $215.91 high from its $185.77 present price, a gain of +16.2%. – source: blockdesk.com.
• 86 positions like today’s in the past 5 years of 1,261 market days produced average net gains at 17.9% each during 31 market days (1 ½ months of 21 each).
• Those annual reward rates of +286% CAGR in holding periods had worst price drawdown risks of only -8.3%.

The primary interest in this article is on Avis Budget Group, Inc. (NASDAQ:CAR)

Investment Portfolio Discipline Summary

This analysis focuses on active investment near-term (3-5 month) stock price gain portfolio performance measurement. Fund investments in equities appeal whenever Market-Maker volume transaction hedging activity forecasts that 80% or more of a subject stock’s near-coming price range is expected to be to the upside and 10% or less may be to the downside.

At the time of each purchase a GTC sell order for all of those just bought shares is placed with the broker where bought. His system will monitor and direct investors to the sale confirmation when accomplished, probably with encouragement for reinvestment.

At the time of a buy, only on the investor’s own personal private calendar, a note to review this holding at 3 months after the purchase, Then, if it is not yet sold, but is priced at a loss, it should be sold and the proceeds put back into the reinvestment stream. If held at a gain less than the forecast target, after considering alternatives, a decision to sell or move the calendar note a month further forward (once) is proper.”

Source: blockdesk.com

Description of Primary Investment Candidate

Avis Budget Group, Inc., together with its subsidiaries, provides car and truck rentals, car sharing, and ancillary products and services to businesses and consumers in the Americas, Europe, the Middle East and Africa, Asia, and Australasia. It operates the Avis brand,; the Budget Truck brand, a fleet of approximately 19,000 vehicles, which are rented through a network of approximately 415 dealer-operated and 390 company-operated locations in the continental United States; and the Zipcar brand, a car sharing network. The company also operates various other car rental brands, such as Budget, Payless. The company was formerly known as Cendant Corporation and changed its name to Avis Budget Group, Inc. in September 2006. Avis Budget Group, Inc. was founded in 1946 and is headquartered in Parsippany, New Jersey.”

Source: Yahoo Finance

These growth estimates have been made by and are collected from Wall Street analysts to suggest what conventional methodology currently produces. The typical variations across forecast horizons of different time periods illustrate the difficulty of making value comparisons when the forecast horizon is not clearly defined

Alternative Transport Rental Service Industry Investments Compared

Here are several businesses similar to Avis Budget Group, Inc. Following the same analysis as with CAR, historic sampling of today’s Risk~Reward balances were taken for each of the alternative investments. They are mapped out in Figure 1.

Expected rewards for these securities are the greatest gains from current closing market price seen worth protecting short positions. Their measure is on the horizontal green scale.

The risk dimension is of actual price drawdowns at their most extreme point while being held in previous pursuit of upside rewards similar to the ones currently being seen. They are measured on the red vertical scale.

Both scales are of percent change from zero to 25%. Any stock or ETF whose present risk exposure exceeds its reward prospect will be above the dotted diagonal line. Capital-gain attractive to-buy issues are in the directions down and to the right.

Our principal interest is in CAR at location [9], at the lower right frontier of Figure 1 forecasts. A “market index” norm of reward~risk tradeoffs is offered by SPY at [15]. Most appealing (to own) by this Figure 1 view may appear to be CVNA. But other reasons to commit capital often also exist, so please see Figure 2.

Comparing features of Alternative Investment Stocks

The Figure 1 map provides a good visual comparison of the two most important aspects of every equity investment in the short term. There are other aspects of comparison which this map sometimes does not communicate well, particularly when general market perspectives like those of SPY are involved. Where questions of “how likely’ are present other comparative tables, like Figure 2, may be useful.

Yellow highlighting of the table’s cells emphasize factors important to securities valuations and the security CAR, most promising of near capital gain as ranked in column [R].

Figure 2

Why do all this math?

Figure 2’s purpose is to attempt universally comparable answers, stock by stock, of a) How BIG the prospective price gain payoff may be, b) how LIKELY the payoff will be a profitable experience, c) how SOON it may happen, and d) what price drawdown RISK may be encountered during its holding period.

Readers familiar with our analysis methods after quick examination of Figure 2 may wish to skip to the next section viewing Price range forecast trends for CAR.

Column headers for Figure 2 define investment-choice preference elements for each row stock whose symbol appears at the left in column [A]. The elements are derived or calculated separately for each stock, based on the specifics of its situation and current-day MM price-range forecasts. Data in red numerals are negative, usually undesirable to “long” holding positions. Table cells with yellow fills are of data for the stocks of principal interest and of all issues at the ranking column, [R].

The price-range forecast limits of columns [B] and [C] get defined by MM hedging actions to protect firm capital required to be put at risk of price changes from volume trade orders placed by big-$ “institutional” clients.

[E] measures potential upside risks for MM short positions created to fill such orders, and reward potentials for the buy-side positions so created. Prior forecasts like the present provide a history of relevant price draw-down risks for buyers. The most severe ones actually encountered are in [F], during holding periods in effort to reach [E] gains. Those are where buyers are emotionally most likely to accept losses.

The Range Index [G] tells where today’s price lies relative to the MM community’s forecast of upper and lower limits of coming prices. Its numeric is the percentage proportion of the full low to high forecast seen below the current market price.

[H] tells what proportion of the [L] sample of prior like-balance forecasts have earned gains by either having price reach its [B] target or be above its [D] entry cost at the end of a 3-month max-patience holding period limit. [ I ] gives the net gains-losses of those [L] experiences.

What makes CAR most attractive in the group at this point in time is its basic strength of reward to risk ratio of 2.0 to 1 in [T], more than the brevity of holdings needed to reach closeout prices..

Further Reward~Risk tradeoffs involve using the [H] odds for gains with the 100 – H loss odds as weights for N-conditioned [E] and for [F], for a combined-return score [Q]. The typical position holding period [J] on [Q] provides a figure of merit [fom] ranking measure [R] useful in portfolio position preferencing. Figure 2 is row-ranked on [R] among alternative candidate securities, with CAR in top rank.

Along with the candidate-specific stocks these selection considerations are provided for the averages of near 3000 stocks for which MM price-range forecasts are available today, and 20 of the best-ranked (by fom) of those forecasts, as well as the forecast for S&P 500 Index ETF (SPY) as an equity-market proxy.

Current-market index SPY is not competitive as an investment alternative. Its Range Index of 38 indicates 62% of its forecast range is to the upside, but Less than 3/4ths of previous SPY forecasts at this range index produced profitable outcomes, with enough losers to put its average payoff in low single-digit positive result.

As shown in column [T] of figure 2, those levels vary significantly between stocks. What matters is the net profit between investment gains and losses actually achieved following the forecasts, shown in column [I]. The Win Odds of [H] tells what proportion of the Sample RIs of each stock were profitable. Odds below 80% often have proven to lack reliability.

Recent PriceRange Forecast Trends for CAR

Figure 3

No, this is not a “technical analysis chart” I am showing only historical data. It is a Behavioral Analysis picture of the Market-Making community’s actions in hedging investments of the subject. Those actions define expected price change limits shown as vertical bars with a heavy dot at the closing price on the date of the forecast.

It is an actual picture of the expected future prices for CAR made by experienced market professionals, not a simple hope of a recurrence of the past. Expectations backed up by significant bets of investment capital made to protect market-makers or earn a proprietary profit from risk-taking.

The special value of such pictures is their ability to immediately communicate the balance of expectation attitudes between optimism and pessimism. We quantify that balance by calculating what proportion of the price-range uncertainty lies to the downside, between the current market price and the lower expected limit, labeled the Range Index [RI].

A RI at zero indicates no further price decline is likely, but not guaranteed. The odds of 3 months passing without either reaching or exceeding the upper forecast limit or being at that time below the expected lower price (today’s) are quite slight.

The probability function of price changes for CAR are pictured by the (thumbnail) lower Figure 3 frequency distribution of the past 5 years of RI values with the today value indicated.

Conclusion

The multi-path valuations explored by the analysis covered in Figure 2 is rich testimony to the near-future value prospect advantage of a current investment in Avis Budget Group, Inc. over and above the other compared alternative investment candidates.

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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in CAR over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Peter Way and generations of the Way Family are long-term providers of perspective information, earlier helping professional investors and now individual investors, and discriminate between wealth-building opportunities in individual stocks and ETFs. We do not manage money for others outside of the family but do provide pro bono consulting for a limited number of not-for-profit organizations.

We firmly believe investors need to maintain skin in their game by actively initiating commitment choices of capital and time investments in their personal portfolios. So our information presents for D-I-Y investor guidance what the arguably best-informed professional investors are thinking. Their insights, revealed through their own self-protective hedging actions, tell what they believe is most likely to happen to the prices of specific issues in the coming weeks and months. Evidences of how such prior forecasts have worked out are routinely provided, both on blockdesk.com and on our Seeking Alpha Contributor website.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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