Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
|
|
|
|
A Sagging Credit Market Should
Lead to Higher Profits for Portfolio Recovery Associates (PRAA) |
Published:
August 27, 2007
Shares
in debt collection specialist Portfolio Recovery Associates (Nasdaq:
PRAA, $50.64)
have fallen more than
-20% over the past several weeks. The stock reacted negatively
after the company released earnings that met analysts'
expectations but reported a softer-than-expected collection
rate.
PRAA's business model is simple. The company buys defaulted
credit card, auto loan and other debts from lenders. Because
this debt is in default, PRAA pays just a few pennies for each
dollar of debt it purchases. The company then turns around and
tries to collect on that debt, calling consumers in default and
trying to negotiate a settlement. As long as PRAA can collect a
few pennies more than it pays for the debt, the company makes a
solid profit. And PRAA has been doing just that for years.
The company posted a +17% rise in earnings for the second
quarter -- impressive growth by any measure. The problem was
cash collections, a measure of how much cash PRAA actually
collects from the debt it buys. PRAA didn't quite meet analysts'
forecasts on that metric.
But, we don't see this as a major problem. The company recently
opened up a new call center to handle collection calls that
isn't showing the productivity of its other locations. But
management is taking steps to improve that operation. And the
firm apparently sees no fundamental deterioration in its business
prospects -- PRAA bought more than $2.5 billion in defaulted
debts in the second quarter, the second-highest quarterly
purchase in PRAA's history. As collections from these new debts
start to flow, cash collection rates are likely to rise again.
And my staff and I believe that the current credit environment
could eventually benefit PRAA. Specifically, one of the
impediments to PRAA's growth in recent years has been the rising
cost of buying up bad debts. With consumer credit quality high
for most of the past four years, the supply of bad debt
available for purchase fell. As supply dwindled, competition
between credit recovery firms picked up and the cost of buying
this debt rose. That had an impact on profitability.
But lately, the trend has reversed. Credit quality has declined
somewhat and banks have been writing off more bad debts -- this
represents a greater potential market for PRAA. It's not
surprising that the company made larger debt purchases in the
second quarter. And trading at just 14 times next year's
earnings estimates and growing at more than +14% annualized,
PRAA is a bargain at current levels.
-- Paul Tracy
Editor
StreetAuthority
Market Advisor
| To
receive in-depth guidance on today's leading investing
opportunities each month, plus access to five model
portfolios, please subscribe to Paul Tracy's premium investment
newsletter -- the StreetAuthority
Market Advisor. |
Paul Tracy
founded StreetAuthority and became Chief Investment Strategist in 2001. Prior to
that he spent several years as Managing Editor at a multi-million dollar
financial publishing firm with over 150,000 subscribers. In addition to
his role as managing editor and lead financial writer, he was also
responsible for equity research and managing a team of seasoned
professional financial writers, researchers and market commentators.
Paul's previous experience
includes a position at Robert W. Baird & Co.'s full-service
brokerage operations as well as economic research work on a Money and
Banking project funded by the National Bureau of Economic Research. He
has also spent time doing outside consulting and research for the
University of Virginia, has appeared as a guest expert on several
prominent financial radio shows, and has been a featured speaker at
various investment conferences across the U.S.
Paul graduated with a B.S.
in Finance and Management from the McIntire School of Commerce at the
University of Virginia.
|
|
Investing Doesn't Get Any Easier Than This |
Stock picker Amy
Calistri's strategy is as simple as investing gets -- just one idea
a month designed to make money in today's market. Invest this way
and you don't have to worry about oil prices, automaker bailouts, or
what the Fed is up to -- because every "bad" economic development
actually helps some investment or another.Your investing life can
get a lot simpler -- starting today.
Go here to learn about Amy's simple investing strategy.
|
|
|
