Portfolio Recovery Associates: Apropo of Bailouts

With my views on the economic drop being much deeper and longer than most, I am beginning a stake in Portfolio Recovery Associates (PRAA), which is essentially a debt collection company - they buy debts gone bad from other companies for a cheap price and then try to collect more than they paid for. Sort of like what our government is going to do with $700B pretty soon. ;)

Much like our push into pawn shops - and highlighting of "low on the totem" pole retailers - these all play off the same theme. The reasons to own this name should be quite obvious if you've read my articles for more than a week. This should be a growth industry in the coming few years. The last earnings report is here. The company's website is here.

Portfolio Recovery Associates, Inc. provides outsourced receivables management and related services in the United States. The company engages in the purchase, collection, and management of portfolios of defaulted consumer receivables. The company serves financial services, auto, retail, utility, health care, and government sectors.

At $46 the stock is trading at a PE ratio of under 15 on 2008 estimates of $3.12, for about 15% growth. The chart is excellent of late and we have a pullback to the 20 day moving average today as the stock is down 6%+. We're starting a 1.2% stake in the $45.60s and would like to add on pullbacks to the 50 day moving average down near $44.

Disclosure: Long Portfolio Recovery Associates in fund; no personal position

Comments

[Nelson_Lai1975:]

I have sold as I realized one thing.

When economy get as bad as now, people just stop paying.

So what if you get a few notification letter from the collection agency, there can't send you to jail. When people are having problem paying even their mortgage payments, who cares about collection letter.

2008 Oct 02 05:46 PM

[metal27:]

PRAA is well run, has a record of making money on the debt they buy. They also are reputed to be more humane in their collection efforts than most in the business. I owned the stock some years ago, sold because times were too good (hedge funds were buying debt at too high a price) but I may have to revisit it, do new DD, as anyone should.

The keys in this business are the price paid for the debt and the skill of the collection people--PRAA gets high marks in both categories from TMF, which has followed and recommended this stock for years.

2008 Oct 03 02:14 PM

[Fighting Mad:]

"Reputed to be more humane in their collection?" They have recently accused my husband of hiding from a credit card debt of almost $2,000 from 1998 for an account he never had. He never opened a credit card in his name until 3 years ago. Now, we are being harassed and threatened by Portfolio Recovery Associates saying, "We will ruin you, until you pay!" According to PRA, they have been mailing collection notices to our home address since 2000; our address did not exist until 2006 when the subdivision was built. This has been a nightmare and I would hope that any reputable and ethical business person would not invest in this company. It is hard working people like my husband and I that are being taken advantage of by this company. For more complaints on PRA, Google “Portfolio Recovery Associates,” you will be amazed at the results.

2008 Oct 09 10:14 PM

[DutchMark:]

You'll always have bad experiences from collecting agencies, some valid some not. It's a sensitive subject for many people.

2008 Oct 10 03:40 AM

[IRSCrimeWatch:]

Look, if you value your dough, don't invest in a company that is trying to defraud the IRS by running a 1099-c ponzi scheme. They pay $5 for a bad, out of limt , unverified debt, then file for deduction for the alleged full balance of the debt ($5000), claiming they're out the $5000 instead of five bucks. That's a $4995 windfall for $5 - pretty good, unless you get caught at it. Since they've decided to go whole hog into this phony deduction scam, the jig will be up shortly for PRAA. Haven't they heard that the IRS are the best debt collectors in the whole world?

You'd do better to stick a quarter in a slot machine, then send an invoice to the casino for what you could have won had you put a dollar in. You'd do better because you wouldn't end up in the pokey next to Kenneth Lay. Where do they get these creative accountants that come up with these schemes? Does everyone want to earn free room and board, courtsey of the state?

If this 1099-c scheme PRAA is pulling is legitimate, then I'm Mary Queen of Scots! Stay away! Stay away! Stay away!


On Oct 03 02:14 PM metal27 wrote:

> PRAA is well run, has a record of making money on the debt they buy.
> They also are reputed to be more humane in their collection efforts
> than most in the business. I owned the stock some years ago, sold
> because times were too good (hedge funds were buying debt at too
> high a price) but I may have to revisit it, do new DD, as anyone
> should.
>
> The keys in this business are the price paid for the debt and the
> skill of the collection people--PRAA gets high marks in both categories
> from TMF, which has followed and recommended this stock for years.

Mar 05 03:11 PM

[User 389007:]

Invest in this company if you support liars, thieves and cheats! They are harassing people in these difficult economic times and it's shameful. Unfortunately reporting this company to the Better Business Bureau or the FTC or the state attorney general doesn't stop them from calling my phone & my job repeatedly every day. They ignore cease & desist requests and they refuse to provide proof of debt. I don't understand why all these so-called "consumer" laws cannot be enforced and stop this company from their unlawful practices. A previous comment suggested doing a google search to see how many complaints there are - she is right - people are complaining but no one is listening. They are wasting people's time trying to defend yourself against debts that have been paid, or that you never had at all. They are reporting to credit reports and affecting people's credit with false information. They are the worst of the bad collection agencies.

Apr 05 10:34 AM