Tag - Aacc

Macerich REIT (Nasdaq:MAC), CTC Media Inc. (Nasdaq:CTCM) and Isle of Capri Casinos Inc. (Nasdaq:ISLE) are among the biggest percentage gainers in Wednesday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Ashland Inc. (Nasdaq:ASH), Asset Acceptance Capital Corp. (Nasdaq:AACC), Canadian Solar Inc. (Nasdaq:CSIQ), C&F  Financial Corp. (Nasdaq:CFFI), Middleburg Financial Corp. (Nasdaq:MBRG) and M I Homes Inc. (Nasdaq:MHO).

Brad Evans is a portfolio manager of the Heartland Value Plus Fund and the Heartland Value Fund for Heartland Advisors. Evans is a Chartered Financial Analyst and has more than 11 years of investment industry experience. He initially joined Heartland in 1996 as an equity research associate and was later promoted to equity research analyst focusing on, among other sectors, energy and materials. Following a three-year term with High Rock Capital as a vice president and research analyst, he returned to Heartland in 2004 to assume his current position. Evans graduated from the University of Wisconsin – Madison with honors and a B.A. in International Relations, Russian and Political Science.

What qualities do you look for in a small-cap stock? Have your criterion changed given the current macro environment?

“We are extremely valuation disciplined and look for low P/E, low price-to-cash flow, low price-to-book, low price-to-sales, a low multiple of enterprise value-to-EBITDA, discounted cash flow analysis, private market equity value and peer group analysis.

“We like to find companies that are trading at depressed valuations relative to where they traded before in the past. We find assets that are undervalued relative to what buyers are willing to pay for comparable assets based on what we call private market equity value, which is what a strategic buyer would pay for a set of assets. We do an extensive amount of valuation work. We’re bottoms-up stock pickers here at Heartland, so a lot of what we do is bottoms up and then we marry it together with our top-down view of the world. 

“In this environment, you’ve got to be extremely religious in terms of your valuation work and make sure you are tracking a value company that has good growth opportunities. You need strong management teams and we’re focused on companies where insiders are buying stock, not selling it.”

What are your three favorite small-cap stocks with market caps of under $1 billion for the year and why?

“A company called Asset Acceptance (Nasdaq:AACC) is very timely here. Asset Acceptance is a $283 million buyer of charge off consumer receivables, primarily eligible credit card issuers. Asset Acceptance likes to buy bad debt. The underlying thesis is that part of this credit cycle will include delinquency trends . . .

Small-cap stocks are rising in afternoon trading, as crude oil dropped to about $136 a barrel and the U.S. dollar gained on both the euro and the yen. Federal Reserve Chairman Ben Bernanke further fueled bullish sentiments by suggesting the central bank could extend emergency lending to financial firms in a morning speech.

At 2:38 p.m. ET, the Russell 2000 (NYSE:IWM) was up 9.38, or 1.42%, at 667.64, while the Dow was up 52.67, or 0.47%, at 11,284.63.

“Today, Federal Reserve Chairman Ben Bernanke said that the U.S. central bank may keep an emergency lending facility for big Wall Street firms open past the critical year end turn as the Fed hopes to restore financial market stability,” Andy Busch, global foreign exchange strategist for BMO Capital Markets, wrote in an email. “Given the panic Monday in Fannie Mae and Freddie Mac, I think this will help cool some of the hype/panic of another looming financial market meltdown.”

Broad market sectors on the rise this afternoon include airlines, restaurant services, groceries, railroads, major drug companies, trucking transportation and life insurance. Sectors experiencing a sell-off include coal, metal mining, oil and gas operations, iron and steel, construction and agricultural machinery, hotels and motels, gold and silver and chemical manufacturing.

Small-cap companies making news this afternoon include natural gas and oil company Royale Energy Inc. (Nasdaq:ROYL), which is down 14% in afternoon trading as a result of crude oil prices dropping from last week's record-highs. InterDigital Inc. (Nasdaq:IDCC) is falling more than 23% this afternoon after the company announced the start of a hearing in the U.S. International Trade Commission against Samsung Electronics Co. Ltd. InterDigital, a King of Prussia, Pa.-based wireless technology designer and distributor, alleges that Samsung engaged in unfair trade . . .

A slowing economy will likely lead to rising defaults in America’s growing mountain of consumer debt, but bad news to some is like music to others. Portfolio Recovery Associates (Nasdaq: PRAA) and Asset Acceptance Capital Corp. (Nasdaq: AACC) are two debt collection specialists profiting from the ever-expanding opportunities of an unpaid credit card here and an unpaid auto loan there.

Both companies capitalize on portfolio purchase opportunities that result from the growing pool of consumer credit outstanding and an increasing number of credit card and debt charge-offs.

Consumer outstanding credit has grown more than 6% annually in the last 20 years and presently exceeds $2.4 trillion. Credit card charge-offs have been growing at a 12.5% annual rate and will reach $88 billion by 2010; the face value of all debt purchases in the United States has expanded 12% annually and will likely exceed $95 billion in 2010. The $100 billion credit card debt market, the $3 billion bankruptcy market, the $5 billion telecom credit default market and the $2 billion auto loan default market are all expected to double over the next three years.

Portfolio Recovery Associates and Assset Acceptance Capital took asset write-downs in 2007 that cut their share prices nearly in half, creating price appreciation potential for new investors. 

Portfolio Recovery Associates is the nation’s leading full-service provider of outsourced receivables management. It purchases, collects and manages portfolios of defaulting consumer receivables from banks, credit unions, consumer and auto finance companies and retail merchants.