vendredi 26 avril 2019

The stock that went to 500$ with being still under the radar

In november 2017, I bought my first shares of Credit Acceptance Corp after seeing that Sequoia Fund had initiated a position with that stock. 

To me, everything looked great with it: the ROE was high, the predictability was great, the PE and the Beta were low. It was everything I was looking for. The industry of loans to people who have bad credit is a little exposed to polemics, but it worked well for me in the past with Carfinco (CFN.TO, the ancient canadian stock bought by a spanish company). 

Anyway, we live in an era where almost everyone has a bad credit. Even millionaires have a bad credit. How should we ignore that category of people which is becoming the majority of the population? 

I bought my first shares for 287$ US each. Today, only a year and a half later, they're sold for 500$. They almost doubled. And they're still cheap.

Current numbers (according to Yahoo Finance):

Forward PE: 14
Beta: 0,71
ROE: 33
Predictability (according to Value Line): Around 90%
Annual growth last 5 years: 21%
Projected annual growth next 5 years: 20%

To me, it's a great stock. There's always someone to tell that some shit will happen with the company. But so far, they've been wrong and I don't see anything that would worry me. It's one of my few cheap stocks with great ratios. 

It's easy to get a great performance with a stock that's under the spotlight like Spotify. There's so much excitation with it that any news is amplified by the medias and has a direct impact on the price of the shares. When a stock is under the radar (who talks about Credit Acceptance Corp?) and manage to get this performance, it's a great achievement. 

5 commentaires:

  1. The hidden risk I heard of with Credit Acceptance Corp is that in order to manage their risk and still make money with clients with very bad credit, they raise the car price for these clients to go around the legal interest rate limit. It is a timebomb, if (when) the regulators will fix that, the reputation of the company will suffer...
    Make you think of some companies that blew hard in the past?
    Maybe, I find those situations very hard to predict, this is why I pass my turn on this smoking stock.

    1. Giverny sold their position a few months ago. Maybe they think the same.

    2. Maybe!!! If you regularly take your gains on this stock and resist having a big position you will probably make a lot of money, even if the company blow itself. It can grow multiple times before potential trouble actualize.

  2. It's always the hidden risks we need to worry about. I just found out that the CEO of Knight Therapeutics also is one third owner of a PRIVATELY held company that competes against Knight Therapeutics. Talk about a conflict on interest. In the case of companies who finance car loans...well, let me put it this way...I take my 75 year old father to buy a car and they offer him an 8 year car loan. No joke. We may be looking at the car financing equivalent of the mortgage crisis in the States ten years ago if the economy gets bad. They are giving loans to pretty much anybody. You may not be alive long enough to pay off that loan, but they do not care. LOL

    1. Well, 75 years old clients are not that common I guess.