There appears to be a some Wall Street investors moving toward below-the-radar financial services stocks, and yesterday Nicholas Financial, the subprime auto lender, got some props, via SeekingAlpha.com, from fund manager Eddy Elfenbein, who writes the Crossing Wall Street blog:
Nicholas Financial (NICK) just came out with earnings and it was another good quarter. The company earned 22 cents a share compared with just eight cents a year ago. It really is remarkable how cheap this stock is. For the first six months of their fiscal year, NICK earned 43 cents a share. For Q4 of last year’s fiscal quarter, they made 20 cents a share, so that’s 63 cents for the last three quarters. The big issue to watch for NICK is percentage for credit losses, and that fell to 5.84% from 9.86% a year ago. This is the second quarter in a row of declining year-over-year numbers. In other words, things are most likely to get better for them.
Whoever sold out last week was probably expecting some bad news. Well, it didn’t come.
NICK is trading just south of $7 per share, approaching its 52-week high. The company has a market capitalization of nearly $73 million.
We have deep government involvement in the industry, which breeds paralysis while folks wait to see what the government will do next. No one wants to buy and then have a major incentive program announced that they have missed because they acted to soon. We now have discussions of a “Cash for Clunkers” plan. I’m sure some consumers are waiting to see what additional benefits might be available to them. Another group wants to make sure they don’t buy a vehicle soon to be orphaned. Many dealers have stopped ordering vehicles from GM and Chrysler because they don’t want to get caught with “orphaned inventory” and/or their lenders might have put them on “finance hold” or pulled their floor plan completely due to impending bankruptcy with the associated loss of new vehicle “buy back” by the OEM which is obligated in the franchise agreement but voided in the case of bankruptcy. Once resolution on these many issues is reached pent up demand will open the floodgates.