Keith Jamison
Anyone looking at ACF here? Book value is 12.50, still supposed to make over 70 cents in CY03. Risks yes, but seems very discounted here under 4.
Looks like the 50% drop today was the result of this news: biz.yahoo.com
Of interest was the last paragraph: ""We now question the viability of AmeriCredit's business model," wrote Joel Houck, an analyst with Wachovia Securities, on Thursday. "We believe this is the third time management has had to make significant revisions to its earnings forecast, including two write-downs of its receivable. With no signs of improvement in recovery values of used cars and continued weakness on the part of the consumer, AmeriCredit is fighting major headwinds in 2003." (Houck doesn't own any AmeriCredit shares, but Wachovia has had an investment-banking relationship with the company in the past.)
I don't like finance companies for just this reason. As an investor, I have no way of quantifying the risk involved in the loan portfolio. Therefore, it is always a surprise announcement of "much worse than expected performance" that either forces the investor to wait and hold the suddenly worth 50% less investment and see if the market will give some of the loss back, or to take all the loss at once and move on. There are folks who believe they can correctly figure out this risk profile, but I don't happen to be one of them.
My guess is that they never recover. But that's all it is....a guess.
I'll pass.
TimbaBear |
