ericvann

Nicholas Financial: For the Patient Investor

On Nov 11 06:35 AM Smart Guy wrote:

> I think that your comment about bankruptcy is 100% wrong. Nick has
> a tremendous amount of tangible book equity (around $83 million).
> The only way for them to go bankrupt would be if their banks were
> to call the loan and I just don't think that will happen when they
> have so much equity behind the bank. In the worse case, the banks
> would just push them to reduce the size of the portfolio and pay
> down the bank debt. Moreover, in a terrible economy, you would think
> that the new loans being booked by NICK would be better quality than
> their old portfolio based on trickle down! To me, this is beyond
> a gift, margins will eventually return and you can bet that competition
> will be significantly lower. This is just a game of patience for
> the value investor.

The article doesn't say that bankruptcy in 2009 is likely, it says that such a likelihood is priced in. There's a world of difference.