Creative Financing Makes America's Car-Mart a Good Bet in a Difficult Economy

Well, probably not a wife, but America's Car-Mart (CRMT) is one of those smaller ($225m cap) niche companies that knows how to creatively make a buck.

America's Car-Mart was founded in 1981. It presently has 92 locations in Arkansas, Alabama, Oklahoma, Missouri, Kansas, Kentucky, Indiana, Tennessee and Texas. Car-Mart provides affordable used vehicles for the proletariat. With over 36,000 customers (many repeats, according to Car-Mart) this company has managed to maintain success by operating in smaller towns, internally financing most of the vehicles it sells and fostering unique sales system that at times borders on barter.

At CRMT, buyers can pay their vehicle loans weekly, biweekly and monthly. If the buyer is short on cash, Car-Mart will place the vehicle in a layaway plan that allows payments of up to six weeks on one's down payment. Car-Mart trades for just about anything of value, from electronics, to household appliances, even farm animals, making this one-of-a-kind company part auto dealer, part loan company, part pawn shop and part rendering factory. It's perfect for the small-town southern and south central U.S.

Smart management makes this business model work. CRMT is actually more highly rated by a majority of analysts covering the used vehicle sector than any competitor - including Car Max (KMX). Located in Bentonville, Arkansas, America's Car-Mart has control over almost all the pieces of its business - kind of like the "other" Bentonville, Arkansas company. CRMT recently opened two new lots, in Lexington, Kentucky and Stillwater, Oklahoma - growing slow and steady. President Hank Henderson, on the eve of announcing CRMT earnings on September 4th, stated that America's Car-Mart has the best selection of quality used vehicles in its 25-year history. Business is brisk.

Trading at $19.00/share on August 28th, CRMT has had a fifty-two week price swing of $9.02-21.33/share. The PE is about 14.5 with no dividend. There are 11.7m shares outstanding with a reasonably active daily trade record.

If you think that the average southern American will shun high-priced, smaller hybrids for those low-priced "mature" SUVs, Oldsmobiles, Pontiacs, Chevys and Fords that can be financed or bartered through a small town car lot with locals running the show (making money on all the angles), CRMT may be worth your speculation. My bet is that the red states will purchase within their financial means (a lesson yet to be learned on the coasts) and continue to grow America's Car-Mart business. This stock may hit $25 soon if earnings beat the Street's estimate next week.

You just have to cheer on a company that will take a cow and a refrigerator as boot for a 2001 Chevy Blazer.

Disclosure: The author has not traded farm animals, appliances or his children for CRMT stock at this time.

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