This issue had a lot to offer. The publishing industry, as you might guess, has some pretty terrible economics behind it (except for those who also provide business services). I found it quite interesting to see the companies that deal with buying up receivables at a discount and then trying to collect on them. They are similar to cash fronting businesses and they make a solid return every year while requiring little in the way of assets. Substantially all their earnings are retained to purchase even more receivables year over year- it’s an internal compounding machine within one of these businesses if done correctly. If these won’t be affected by financial regulation, a few of these could be great purchases today.
Interesting Businesses (not great, just interesting to me):
- Bowl America Inc.- the three most profitable months for bowling alleys are January, February, & March (or at least for this company)
- Educational Development Corp.- probably the single-most consistent business I’ve seen that doesn’t collect royalties. I’m curious what causes it…
- Life Time Fitness Inc.- gym, growing at a solid clip even though it needs debt to grow (return on assets isn’t high enough to fund expansion alone at about 6%)
Interesting Prices (potential discounts):
- Asta Funding- purchases receivables at a discount; not a great business but could be a good purchase at today’s prices
- Beasley Broadcast- decent business, if it returns to previous profitability then we’ll see a good upswing
- FirstCity Financial- if continues to grow receivables business, could be good situation
- Global Cash Access- most interesting in issue if not affected by regulations
- Ambassador’s Group
- Credit Acceptance Corp.
- Morningstar Inc
- Net 1 UEPS Tech
- Portfolio Recovery Associates
- World Acceptance