Barron's Online says Medallion Financial -- a lender to cabbies -- will continue to benefit from the rapidly-rising value of taxi licenses, which recently hit a record $600,000 in NYC. Shares are down 17% in the past year (vs. a 13% gain for the DJ U.S. Consumer Finance Index) as the company's interest rate spread was squeezed when borrowers locked in at lower rates while it payed its own debt on a float. But now that interest rates have stabilized, Pres. Andrew Murstein says the company will begin widening its spread. NYC medallions, its core business, have gained an average 15% over the past 15 years, and Murstein expects the same going forward. The possibility of charging private cars to enter midtown Manhattan during peak hours could cause medallion prices to rise at an even sharper rate. Medallion hasn't lost a loan in 70 years, and repossesses an average of only 2 assets per year. A new credit facility from Citigroup is allowing Medallion to increase its leverage, which analysts say could bump ROE from the high-single-digits to 15%. The company is also beefing up its business in lucrative niche markets like boats and RVs. James Shircliff of River Road Asset Management says Medallion is "one of those undiscovered, unloved, underfollowed small-cap companies." Short interest has gone from 3.7% to 6.7% in the past three months; shares could rise in a hurry if they're squeezed. "Shares are poised to outperform the market."
Commentary: Medallion Financial: Good Defensive Play • Taxi Medallion Sale for Record $600,000 Reported by Medallion Financial Corporation [BW] • MEDALLION FINANCIAL CORP Financials [Edgar]
Stocks/ETFs to watch: Medallion Financial Corp. (TAXI). Competitors: Ameritrans Capital Corp. (AMTC), CIT Group Inc. (CIT)
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