AACE ==> The March Madness Winner!

[mrmarket]

Hey wait a minute, I love Old Milwaukee.

[Websman]

Hey wait a minute, I love Old Milwaukee.

Old Milwaukee???? ....You're kidding....right?

Oh well....That's OK, I watched an episode of the Dukes Of Hazzard last night.

YEEEEEEEHAAAAAAAAA!!!!!!

[scifos]

Most of the people who use this service don't know how to calculate 20% interest charges anyway. They'll gladly get their check 10 days early.

Ha ha ha. Capitalism (well, post industrial capitalism anyways now that the technological revolution has happened) is all about the smart people taking advantage of the dumber.

As my econ prof says, "If that's the result of their utility maximizing function then so much the better." That really applies here, they get more utility out of getting their money 10 days earlier than wait for it and not pay the interest. Personally, I think Utilitarianism is BS as a philosophical ideology, but it is useful in economics as a way to explain people's EXPECTED behavior.

[scifos]

Hey wait a minute, I love Old Milwaukee.

Nothing better than some fine whisky and a game of poker.

[Websman]

Ha ha ha. Capitalism (well, post industrial capitalism anyways now that the technological revolution has happened) is all about the smart people taking advantage of the dumber.

Isn't it great being superior to others! HAHAHA!!!!

Then again...How can I call myself superior when I already admitted that I've been watching the "Dukes Of Hazzard"? Hmmm...

[mrmarket]

Once again, we have the government meddling with the invisible hand of the market. What's curious is that the demand for these services has grown significantly over the past few years. So clearly, this was a service that people wanted.

Now what are they going to do when they need a few bucks in a pinch? Go to a loan shark??

================================================== =====

Associated Press
Payday-Lending Stocks Dip on Cash America
Friday April 15, 5:58 pm ET
Payday-Lending Stocks Are Lower As Cash America Withdraws Its 2005 View


CHARLOTTE, N.C. (AP) -- Shares of Cash America International Inc. and other companies that provide "payday loans" tumbled Friday after Cash America withdrew its fiscal 2005 earnings forecast, citing uncertainty over tighter requirements issued last month by the Federal Deposit Insurance Corp.

Cash America shares fell $5.89, or 29 percent, to close at $14.61 on the New York Stock Exchange.

The Fort Worth, Texas, company also said demand for pawn loans and cash advances hadn't rebounded from seasonal lows.

Cash America said the FDIC's new guidance restricts the offering of short-term cash advances by FDIC-regulated banks, including two banks offering such loans through Cash America's stores.

Among other things, the new FDIC guidelines require lenders to ensure they don't make payday loans to people who have had any other such loans outstanding for three months out of the previous 12-month period.

Payday loans are generally short-term, high-interest loans to customers who pledge postdated checks, typically cleared on payday, as collateral.

Cash America said it doesn't yet know when or to what extent business generated through those banks will change as a result of the new guidelines. The banks are in the process of submitting plans for compliance to the FDIC, the company said.

In January, Cash America forecast income from continuing operations of $1.63 to $1.76 a share, and the mean estimate among analysts polled by Thomson Financial was $1.77 a share.

For the first quarter, Cash America said it expects to report income from continuing operations of about 39 cents a share, including a foreign currency related loss of 1 cent a share. That compares with a January forecast of 45 cents to 47 cents a share and a mean Thomson Financial estimate of 46 cents.

Shares of Advance America Cash Advance Centers Inc. fell $1.20, or 8 percent, to end at $13.72 on the NYSE.

First Cash Inc. shares dropped $3.38, or 16 percent, to close at $17.65 on the Nasdaq Stock Market.

EZCorp Inc. shares fell $2.06, or 14 percent, to $12.20 on the Nasdaq.

Other companies providing the short-term loans trading lower Friday included Ace Cash Express Inc., QC Holdings and Dollar Financial Corp.

[B.J]

How can I call myself superior when I already admitted that I've been watching the "Dukes Of Hazzard"? Hmmm...

You still have Spock going for you

[B.J]

Once again, we have the government meddling with the invisible hand of the market. What's curious is that the demand for these services has grown significantly over the past few years. So clearly, this was a service that people wanted.

Now what are they going to do when they need a few bucks in a pinch? Go to a loan shark??

Or rob people, perhaps?

[mrmarket]

Pretty good stuff by the FOOL here on AACE

Motley Fool
Can Prejudice Harm a Stock?
Tuesday June 7, 3:52 pm ET
By Lawrence Meyers


We define the word "prejudice" as "an adverse judgment or opinion formed beforehand or without knowledge or examination of the facts." Prejudice is a bad thing, and we see its effects on society one day after another, year in and year out.
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We also see prejudice in the stock market. It usually takes the form of a stock cratering on very heavy volume because of a news release. Sometimes, people sell in a panic without even having all (if any) of the facts. This kind of prejudice can work to the investor's favor. It may allow him or her to buy a stock at a substantial discount to its intrinsic value. So, while prejudice in the real world often results in violence, in the stock market it can actually create wealth for the astute investor.

This brings us to my thesis: Are some stocks selling at a discount because of prejudice? The answer is yes, of course. I have a few of them in mind, but I'll focus on a sector I've been writing about. It's the payday lender (PDL) industry. This includes First Cash Financial Services (Nasdaq: FCFS - News), EZ Corp (Nasdaq: EZPW - News), Cash America International (NYSE: CSH - News), QC Holdings (Nasdaq: QCCO - News), Advance America (NYSE: AEA - News), ACE Cash Express (Nasdaq: AACE - News), and Dollar Financial Corporation (Nasdaq: DLLR - News).

I've received tons of hate email about my previous PDL articles. Most attack me for even discussing an industry so "immoral," one that "takes advantage of an unsophisticated and desperate population" by offering loans with "outrageous APRs." These aren't just voices in cyberspace, either. The perception of PDLs as being "the same as loan sharks" has driven consumer groups to lobby for laws curtailing the PDL industry. Many states have laws on the books, and others are joining the movement.

So, given the wave of negative media coverage on PDLs (which includes both a 60 Minutes II piece and tons of newspaper articles), and the fact that numerous people who abide by the concept of Socially Responsible Investing are avoiding these stocks, I wondered how much of this was the result of prejudice and whether there might be hidden value in these companies as a result.

So I did some research. I called payday lenders in several states, spoke to some customers, and checked out a few surveys. Here are a few things I found out about PDLs:

1. The industry does not prey on poor, desperate, and/or unsophisticated people.
Two diametrically opposed views have surfaced regarding the people who comprise the PDL customer base. Consumer advocacy groups argue that PDL customers are desperate, low-income individuals, while the supporters of payday lending insist that customers are average middle-class folks. So I bypassed both views and asked several PDL owners themselves. Here's what they said: The majority of PDL customers have incomes between $25,000 and $50,000, and the fastest growing segment is customers making between $50,000 and $75,000 a year. More than half of PDL customers have college degrees. More than 90% are aware they must pay a fee. When I asked about consumer protections, they reminded me that almost every state with a PDL law has strict requirements regarding collection methods, disclosure, and rollover renewal limits to protect consumers.

2. Look at the fee, not the APR.
The biggest complaint consumer groups have leveled against PDLs is that the annual percentage rates charged can range as high as 780%. The problem is that translating the fee for a short-term loan into an APR is not an accurate or fair way to judge the industry, despite requirements by every state that APRs be stated on every loan. Here's why:

Say I take out a $100 loan from a PDL and it costs me $10 to do so. I pay back the loan in two weeks. The APR on that loan is 260%! But let's look at other types of fees at other merchants. Say I go to an ATM that's not affiliated with my bank and withdraw $20. I get hit with a $3.50 fee. Well, on an APR basis, that's 455%! Suppose you bounce a $100 check. You get hit with a minimum NSF fee of $25 by your bank. The APR is 650%! Suppose I pay my $100 credit card balance late? The company charges me a $28 fee for doing that, making the APR a staggering 728%!

Now, is there legislation to curb this kind of highway robbery? Do consumer groups get up in arms about ATM fees and NSF fees? No. Why? Prejudice. Anti-PDL ideology makes people inclined to view fees inappropriately as APRs because the product is called a "loan."

3. Payday lenders provide a needed service.
In interviewing both customers and PDL store owners, this one really hit home. There is no other business that provides those in need of a $500-$3,000 loan with a quick and convenient method of obtaining one. Heck, I have outstanding credit, but if I need a loan in that range, my primary choice is to go to a bank. That means hours of my time filling out reams of paperwork, having to put up collateral, searching for all kinds of bank statements, and having to wait days or even weeks for the loan to be approved. With a payday lender, I can walk into a store and walk out in 15 minutes or less with my unsecured loan.

Also, the way our banking system is set up is that those with good credit can go to a bank and get a loan at a favorable interest rate. Since it's not fair to force a bank to make a high-risk loan, people who have poor credit must have somewhere to go if they need a loan. PDLs fill that need.

4. Nobody is forced to take out a payday loan.
In each instance above -- payday loan, ATM fee, bounced-check fee, credit card late payment fee -- the consumer has made his or her own choice about whether or not to use the product. If I had kept enough money in my checking account, I would not have bounced a check. If I had withdrawn $300 from my ATM instead of $20, my APR would have been only 173%. If I'd paid my credit card on time, I'd have paid no fee. Likewise, PDL customers are not required to use the service. Some PDL owners even said they would negotiate a lower fee depending on the customer. Yes, contrary to popular belief, there are actually human PDL owners, who operate stores in residential areas and receive gifts on Christmas from customers. The horror!

5. Not all PDL customers get into endless rollovers, and not all rollovers generate fees.
Some PDL customers renew or roll over their loans with great frequency. Some, but not all, of these rollovers generate a fee as if the loan were new. Currently, 36 states regulate the number of rollovers and the associated fees to some degree. Also, remember that endless rollovers are not necessarily in the PDL owner's best interest. Collecting a 15% fee is no good if the customer ultimately defaults on the principal. Believe it or not, PDL owners don't lend money to everybody who walks in, nor will they allow customers to consistently roll over their loans. It's not in their best interest. One owner told me, "You think I'd loan money to someone who already had three loans outstanding at other shops? That's a bad risk." Many owners and state regulations also require customers to have some minimum income threshold.

Much of this was a surprise -- even to me, because I, too, thought PDLs did all the nasty things they've been accused of doing. The difference was that it didn't matter to me, and I'm glad it didn't, because it allowed me to find some great investments.

So, as we can see, prejudice does exist in the market, and it can create opportunity. Unfortunately, it can also destroy an industry. PDLs are under siege in many states, and the stocks have suffered mightily as a result. It remains to be seen just how detrimental this tidal wave of prejudice and misperception will be to the industry. At the moment, I am cautiously optimistic for some of the players, especially those who are diversified into pawnshops.

Oops. Pawnshops. There's another dirty word, right? Better check for yourself....

There's much more to read about payday lenders:

[MEA_1956]

Fwiw

This artical sure makes a good point on PDL's, Now if the rest of the world reads it things will get back to where they were when you picked it. Later Marlin.

[mrmarket]

Back up over 200 Day MA....strap in!

[jiesen]

Back up over 200 Day MA....strap in!

Not only that, but SSNC is also making its move this week. Just another buck or so, and SSNC will be the 69th winner!

You are HUGE!

[B.J]

Thanks for the update, $$MM$$... I'm going to keep my eye on this one.

[billyjoe]

I just spotted an Ace Cash Express branch located in a Sunoco gas station in Northern Ohio. Has anyone else seen such a matchup?

billyjoe

[mrmarket]

More good fundamental analysis on the pay check loan biz:

Motley Fool
Pawnshops? Payday Loans? Paydirt.
Thursday August 11, 4:46 pm ET
By Lawrence Meyers


It's time to celebrate: After a long and winding search, I've finally found two small-cap stocks with big value and growth potential. Ironically, they turned up in my own backyard; I've written about both of these companies before. Both issue payday loans, and one also owns pawnshops.
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Yes, I'm once again talking about First Cash Financial Services (Nasdaq: FCFS - News) and QC Holdings (Nasdaq: QCCO - News). In my opinion, their competitors EZ Corp (Nasdaq: EZPW - News), Cash America International (NYSE: CSH - News), Advance America (NYSE: AEA - News), ACE Cash Express (Nasdaq: AACE - News), and Dollar Financial Corporation (Nasdaq: DLLR - News) aren't in the same league, for reasons I've explained in other articles.

Here's another reason why I like these companies, particularly First Cash: After the FDIC suspiciously curtailed these companies' ability to lend in states like Texas, management found a brilliant way around those restrictions. I love a company that charges headlong into adversity and quickly solves a crisis. That's the kind of management I want to see running my business.

But just make sure I'm on the right track, let's check out the numbers. Here's First Cash:


Market cap under $2.5 billion? Yes, $360 million.
Historical and projected earnings growth of 15%? 37% the past five years, 19% for the next five.
Positive free cash flow? Yup, $34.5 million over the past 12 months.
Market cap / FCF < P/E? Yes, that ratio comes in at a spectacularly low 0.61.
MC/FCF/five-year growth rate < 0.66? Wonders never cease -- 0.54.
Insider ownership of 10%-50%? Yes -- 24%, very solid.
Net margins of 7% or more? Yes. An excellent 12.6%.
Not too shabby. As for QC Holdings:


Market cap under $2.5 billion? Yes, $289.9 million.
Historical and projected earnings growth of 15%? 37% the past five years, 19% for the next five.
Positive free cash flow? Yes. $6.5 million for the last 12-month period for which cash flow data is available.
Market cap / FCF < P/E? No, 44.6 compared to 17.
Insider ownership of 10%-50%? More like 69%. But let's not call that bad.
Net margins of 7% or more? Yup, 16.40%.
Why isn't free cash flow here as high as we might like? The company is aggressively expanding, but doing so without any debt, and still carrying $32 million of cash in the bank.

On top of all this, QC Holdings is buying back $10 million in stock, which would amount to about 4% of shares outstanding. In both companies' recent quarterly reports, you see confirmation of a trend in this sector: growth, in the form of outstanding same-store comps. How outstanding? Try 15% and higher. People are flocking to this product; despite what critics say, they seem to want it.

For good measure, I'd like to quickly examine dilution. Over the past two years, First Cash shares outstanding have increased at a rather ugly average rate of 7.9%. But diluted shares outstanding actually decreased by 7,000 shares in the course of fiscal 2004. Though this may a bit of a blip, dilution appears to be under control now.

As for QC Holdings, they're a bit harder to get a handle on, since they just went public last July. As of June 30, 2004, they had 12.924 million shares outstanding; one year later, they had 21.537 million. That's an annual rate of about 40%. Not great, but given all that debt-free expansion, I still think the company bears consideration.

Does this mean you should run out and buy these stocks? No! Do your own homework -- don't rely on my suggestions alone. Before I formally recommend these puppies to the folks at Motley Fool Hidden Gems, I plan to wait two quarters to see how the business is going to shake out. Although management has outmaneuvered the FDIC, I want to make certain they're able to execute on their business plan over a slightly longer period.