Forrest

Debunking Citron's Hit Job on World Acceptance Corp. (Part 2)

Thank you Larry for setting the record on WRLD straight.

Debunking Citron's Hit Job on World Acceptance Corp.

Citron is definitely out to do an unfounded bash job on World Acceptance in order to support their short position. Notice that they decided to go after a company who's daily volume is very low where they can probably have some affect on the stock price - that is, for the people who actually believe this trash. Now let's see, WRLD has been in business with a great reputation since 1962 and all the sudden it's a "borderline-legal Ponzi scheme"? Since little has changed since WRLD has been in business all of the years, and if Citron is so smart and full of wisdom, why didn't they publish a report like this way back in the 1990's or even earlier?

Washington Post: Revisiting the Story Behind Capital One

. . . and from what I understand, Capital One's IBS model is now universal throughout the entire credit card industry.

Early on when this IBS was new, Capital One customers were primarily sub-prime, and some would wonder why their rate increased for no apparent reason. The reason was that through the IBS model, it was discovered that the customer's credit rating may have changed, or that the customer may have recently maxed out another card in their wallet, which of course increases risk to Capital One.

Capital One: A Different Short Case

Yep, you're right Andrew, no one ever went broke by taking a profit. The reason that I never sold COF if that I figured the I would keep the shares until I needed the money. It's DRIPed and I own more shares than I care to mention. I do buy and sell other securities, but not often enough to consider myself a trader. Presently, I really don’t have the time to devote to active trading, and have been disappointed with professional advice in the past. I know that I am presently sitting on too many different securities as I write this. I may be a little over diversified, but except for my COF holdings, I didn’t take too big of a hit during the market down-turn over the last year.

Anyway Andrew, I look forward to your next article here at SA and I'll be nice - even if you write about shorting COF again - but don't expect all people to be nice, agree with you, or even thank you, when you post about just about any short. I went back and read your articles about shorting the company the makes those goofy little rubber shoes. Even without delving into the numbers, to me that thing had short written all over it. Moreover, after looking at those responses, one would have thought you had peed in their Cheerios or even worse! On the other hand, post about idea on a long and almost everyone will pat you on the back – or at the least, you don't get any response at all.

Also, NC Trader, sorry to hijack your thread - you wrote a very good article.

Best of luck to all,

Forrest

Capital One: A Different Short Case

Andrew, sorry man, I know that you do give good advice in general and yes, Capital One is one of many financial institutions that has its problems. You do read a lot of BS posts on SA, I guess that mine was just another BS post. But as a long on COF, and man I mean very long - long since Capital One was spun off from Signet Bank ($5.33 split-adjusted) at as a pure credit card play, I get tired of reading about how much of a bunch of morons are running COF and that COF is going down the toilet. I know that many people hate Capital One with a passion and it shows by some of the reply postings yours and other COF articles. Heck, I don’t know, maybe they had a bad experience with them as a customer when they didn’t pay their bill on time or something.

On the other hand, I too have gotten more than a little hot under the collar with COF’s management when they decide to branch out into banking, auto loans, mortgage loans, and HELoC. Yes, COF could do no wrong as a pure credit card play in the ’90 and even up to about ’05. They consistently made money, grew, and their write-offs were better than normal, especially since that they started as a sub-prime credit card issuer. As time went on, COF migrated more to a main-stream card issuer, which I think was a move in the right direction. Everything seemed well until COF decide to buy Hibernia Bank during Katrina, but the stock price held up. Now with the substantial exposure to the NYC (and elsewhere) mortgage melt-down, big home-equity lines of credit, some of which are tied to foreclosure properties, you bet that Capital One is feeling the pressure. Did I mention auto loans? You would think that auto loans would still hold up, but even once great sub-prime used car loan maker Americredit (AFC), is now sucking wind. That being said, I think that COF’s current mid-40’s price reflects the true value for this company at this time, and I think that the market already has those factors that you and this author address already built in to the price.

One thing COF shorts and potential shorts do need to watch for is that at current levels is that COF’s stock price tends to ride up or down with market in general. Lately, very seldom do you find a day where COF’s will go down when the market in general is going up. If you have a big down day or week in the market you can probably short just about any financial and come out on top. I personally think that the big short opportunity on COF happened last year when if dropped from the 70’s to its current trading level. As for shorts and puts on COF? I would say make money in a daily position. Take a COF short position and hold on to it? To me that would be like playing with fire.

BTW, if you guys like to look a financial stocks that go against the grain and don’t have much coverage, take a look at World Acceptance Corp (WRLD), but hell what do I know, I didn’t sell COF when it was in the 90’s!

Capital One: A Different Short Case

"As if you needed another reason to get short Capital One Financial . . .", famous last words by yet another Seeking Alpha author trying to hype support for his current short position in COF. Reminds me of the postings of Andrew Horowitz a few months back where he was telling his all of clients to short COF. He was sure that COF was going to the 20s. Well it didn't, he and his clients had to cover as COF headed to the 50s. My advice is to don't get burned trying to short COF just because someone comes here as says COF is doomed. COF is far from doomed, and will probably fair better than most credit card issuers when the dust settles. If you do decide to go short on COF, I would only do it on a day trade basis.

Double Whammy: Bank Card Companies May Be Next

This article is no more than typical boiler-room talk to add support to the author's short position. You may be able make a couple of bucks in a daily short position, but don't look for the big drop to twenty any time soon.

The Problem With Capital One Financial

COF's portfolio is not all sub-prime anymore like this entertaining article would have you believe. I think COF is oversold like much of the rest of the financial markets, and you guys missed your chance to short COF, but don't let me stop you. It's your money .