Contributor Since 2011
Credit Acceptance Corporation(CACC) is an innocuous name you have likely never heard. Though the company's equity valuation growth has superseded that of Google(GOOG) over that last decade, surprisingly, neither have most of Wall Street. It has virtually no analyst coverage. So what is this billion dollar market plus capitalization blockbuster that's flown under everyone's radar?
A "no credit, no problem" car loan producer for used car dealers run by the country's self-described "biggest used car sales man"(prior to CACC's founding). No earth shifting patents or legacy ownership of raw capital, just good old fashioned creation bad credit loans for a fee. Much like the subprime mortgage lenders of ere, now under DOJ investigation for its securitization practices. The downside relative to the mortgage fiasco is these are loans on ever depreciating assets.
What makes CACC more interesting than its success is its leaderships' response to it. The good times produced at the start of QE and the seizure of traditional bank asset lending in the financial downturn has spawned a massive rush to liquidate significant amounts of their holdings in the position. While other private equity firms of the most notable names have equally recognized the opportunity to capitalize on this high margin asset backed lending of the vehicular kind, and thus go public, CACC's price somehow seems indifferent to the massive influx of more well healed competition(ALLY and SC) in an inevitably competitive and hyper fragile market share space. A place where cheap money isn't just great. It's essential.
No doubt the founder's vision for this market opportunity is unmatched. So much so that I wouldn't want to do anything other than follow his, much of the early backers, and management's footsteps out the door. At least as far as their money is concerned. Especially now that federal regulators have considered some of their practices of interest. Please check their insider sales filings to evaluate the paper trail on your own and reference this promotional Youtube video (https://www.youtube.com/watch?v=wah9p824nYg) for a better understanding of the core business to make your own decisions.
CACC was built over decades through hard sales and marketing ingenuity. It provides a much needed commodity to US citizens. Its market behavior and is another story. It also lives in an entirely new, fragile world. It's flight down may be hard to predict but would be a long drop with only paper in the vault and a Midwest call center for its core. Predictions on global debt and domestic consumer spending habits are also at play, including a potential for a cut rate acquisition for distribution access by the growth hungry margin leaner competitors.
This company has greatly amazed me. I will continue to watch its success in suspense but will not hold my breath in anticipation of future miraculous feats.
Parting words of wisdom. Admire success. Even emulate it. Don't delusionally* hold on to the ghosts of its laurels. Especially when they are not your own. But particularly when they shows signs of decay.
S. E. B. for Early Exit
Ownership transactions: http://finance.yahoo.com/q/it?s=CACC+Insider+Transactions
Graph per Google Finance
DOJ release source:http://www.streetinsider.com/Corporate+News/Credit+Acceptance+Corp+(CACC)+Reports+DOJ+Civil+Investigative+Subpoena/10093746.html
This is not a recommendation. I hold no position for or against this company, nor any of their competitors or affiliates. There is more to this story you need to research on your own and form conclusions about. I hold a series 7 and 66 securities license but do not work for any brokerages currently. Act accordingly.
*This word should exist.