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

[Cinci:]

Remember Smiling Bob? That was a scam too. He got 25 years for that fraud. These people at PRA continue to call me to collect a debt from someone with a similar, but not exact name as I. The residence history is different too. When I tell them this, they accuse me of lying. Very aggressive, threatening and interrogate like the KGB. After checking them out on the internet, it is my opinion that they are predators that prey on poorer and unsophisticated people that can't fight back. I think that they need to be shut down! Since they operate across state lines, it is a Federal thing. I think the IRS fraud is serious business too. I plan to contact my Senator and Congressman and demand action from the FTC! Obama is for the little guy so sending emails to the Whitehouse is on my list. And getting the state AG involved is good too! I think the AGs of Missouri, Vermont , NY, and Arizona are aleady on to them. I am retired and do not owe anybody anything so these guys scare me. The way they operate every American with a telephone and a bank account seems to be at risk.

Oct 18 10:33 PM

[phylthy:]

"Obama is for the little guy."

Man, you are an idiot. I'm sorry but you are. You actually still believe in the "democrats are the workin man's party and the republicans are the rich people party" crap don't you? Have you even been paying attention? Every single member of his G()DD@MN party are lobbyists! And that was his primary campaign promise to the American public? Seriously wake up man. Who do you think the bailouts benifited? Or do you actually buy this whole, "too big to fail" crap? That's awesome. I'm gonna do the same thing. I'll just start a bank *the reserve limit in some countries is 0 dollars right now it wouldn't be hard...), hire a lobbyist at the same time and then put a few politicians in my "i did you a favor it's my turn" thing... next thing you know, the government will give me a billion dollars and when I can't pay it back they'll just print more dollars and give me those! As far as the people affected by the dollar devaluation caused from this disgusting and embarrassing transaction (or series of transactions), SCREW EM. I don't care if they "owed" me money (even though I never had to put up a red cent or any collateral, funny how that works...) nor do I care that that money they owed me was paid in full *by fraudulent US dollars but somehow defacto money for the time being* by the Government of the people who owe me the money. They still owe. And they will pay, or else I will spin off a subsidary and call it "Harrass the debtors at home and work so they feel even more useless" and with this company i will simply sell all the bad debt i accumulated via these underlings TO HTDAHAWSTFEMU Ltd, at interest, and now you owe them AND me, both at interest. Although it is obvious we will never get our money out of some of you, we will get some of it. And from the least intellegent, lowest income out of all of you. Thats who we want the money from anyway. The rest of you are investing your free money into us by continuing to keep your money in our vaults. Did I mention this will go on forever until the dollar is worth .00000003 cents instead of .03 like it is now? I won't care. I will have all the money so you can kiss my @$$. You'll basically have to do what I say cause you're buying power exists solely within me and me alone.

THATS you're obama. Except he didn't start a bank, he just gets paid by them, and gives them plush offices with leather chairs and thousand dollar parking spots. Yeah, he's "for the little guy."

Wake up and help us take back the country man. Seriously you're HURTING us!

Oct 25 01:44 AM